The barbarous relic, the Gold Standard, is alive and kicking, Mr Keynes. Forex reserves consisting of worthless paper money can only possibly be used for intervention on Forex markets. Such reserves are worthless, no, useless, to determine the value of a currency. A mystic is a man who surrendered his mind at its first encounter with the minds of others. Since we are all clashing as to the causes of this crisis, any political plan alleging that it is going to solve the crisis is acceptable for the sheeple, n’est-ce pas, Monsieur Sarkozy?

Martin Wolf reminds us in this morning’s Financial Times that the Group of 20 Leviathans (G20) which is meeting tomorrow Thursday 2 April 2009 in London has not yet reached a consensus on the underlying causes of this crisis or on the best ways to escape from it. Therefore, says Wolf, the G20 summit is largely dealing with the immediate symptoms of the illness. And therefore, says the title of Wolf’s column, the G20 leaders will fail to deal with the big challenge. (1)

The causes of the crisis are worthless paper money and fractional-reserve banking.

Even though some argue that the function of money is to create a single or common market (2), it would appear that the function of money is to settle debts. (3)

Price equals both cost of production and value to the user, both of which must therefore be equal to each other. (4)

Not only the good purchased, but also the money given in exchange for the good must therefore have some value.

The US dollar and economy are no longer capable of supporting the current global economic, financial and monetary order. As long as this strategic problem is not directly addressed and solved, the crisis will grow. Indeed it is at the heart of the crises of derivative financial products, banks, energy prices … and of their consequences in terms of mass unemployment and collapsing living standards. (5)

Economists are therefore arguing for the re-introduction of the barbarous relic, arguing for the re-introduction of the Gold Standard. (6)

This writer is arguing since almost a decade that by marking its gold reserves to market on a regular basis, in contradiction to the US of A treasury which marks its gold reserves to the model of 40-something dollar an ounce, the European Central Bank (ECB) has re-instated gold as the natural vehicle to consolidate one’s wealth.

Half a decade ago, this writer wrote:
In Russia, the Middle East and India, there is an increasing aversion against the dollar and is a search for a replacement under way. The present gold fever in China where individuals are since early 2003 again allowed to possess gold implies that in order to be an economic world power by 2012, China could well accede to this world standard, Freegold. At that moment only physical gold will be traded as the natural vehicle to incorporate one’s wealth, the value of paper gold will be reduced to nothing, and the value of the euro will increase quarterly upon the marking to market of its gold reserves.
The ECB will not define the euro like the old gold standard as a certain quantity of gold, but will use it as a free trading financial reserve so that each increase in the price of gold will bring about an increase in the value of the euros reserves and thus an increase in the value of the euro itself. This currency concept is closer to the tenets of libertarianism than a gold standard because of the exchange restrictions which inevitably follow. (7)

The annual gold sales of the ECB are published here
http://www.ecb.int/press/pr/date/2008/html/pr080701.en.html

The ECB Monthly Bulletins
http://www.ecb.int/pub/mb/html/index.en.html
publish the weekly, monthly and quarterly value of the ECB’s gold reserves.

As UPS-DHL-FedEx does not serve the island where this writer is living, he had to take the boat yesterday to receive the following book from Saint Amazon:
David Marsh, “The Euro – The Politics of the New Global Currency”, Yale University Press, 2009.

And guess what? The book has a chapter, indeed Chapter ONE, under the title “Blood and Gold”. The chapter does discuss the history of the Gold Standard and the Gold Reserves of the precursors of the ECB, such as the Bundesbank and the Banque de France. The book does however not discuss the Gold Reserves of the ECB. Like all his colleagues, David Marsh amalgamates the gold reserves of the ECB with the foreign exchange (Forex) reserves of the ECB. And he speaks about the “gold and foreign exchange reserves” of the ECB.

Forex reserves consisting of worthless paper money can only possibly be used for intervention on Forex markets. Such reserves are worthless, no, useless, to determine the value of a currency. This demonstrates how sterile is the debate about introducing the International Monetary Fund (IMF)’s Special Drawing Rights (SDRs) as reserve currency.

An SDR basket consisting of paper currencies is as worthless, no, as useless, I said, as any other paper money. (see also note (3) again)

If as the British host of the G20 summit, Gordon Brown, says, the main aim of the G20 summit must be to “clean up” the global banking system (8), our Masters should address the causes of the crisis.

If Brown adds that it is vital banks relearn common values like HONESTY and responsibility (8 again), perhaps it is about time that our Masters don’t run out Honest Money with their legal-tender laws (Yes, Mr Gresham).

But of course, it is easier for our Masters, the 20 Leviathans, to continue to deny that the function of money is to settle debts.

As Ayn Rand put it in Galt’s speech in her novel “Atlas Shrugged”:
A mystic is a man who surrendered his mind at its first encounter with the minds of others. Somewhere in the distant reaches of his childhood, when his own understanding of reality clashed with the assertions of others, with their arbitrary orders and contradictory demands, he gave in to so craven a fear of independence that he renounced his rational faculty. At the crossroads of the choice between “I know” and “They say,” he chose the authority of others, he chose to submit rather than to understand, to believe rather than to think. Faith in the supernatural begins as faith in the superiority of others. His surrender took the form of the feeling that he must hide his lack of understanding, that others possess some mysterious knowledge of which he alone is deprived, that reality is whatever they want it to be, through some means forever denied to him.
http://aynrandlexicon.com/lexicon/mysticism.html

The barbarous relic is alive and kicking, Mr Keynes, but since we are all clashing as to the causes of this crisis, any political plan alleging that it is going to solve the crisis is acceptable for the sheeple, n’est-ce pas, Monsieur Sarkozy?

Ivo Cerckel
ivocerckel@siquijor.ws

NOTES

(1)
Why G20 leaders will fail to deal with the big challenge
By Martin Wolf
Published: March 31 2009 19:10 | Last updated: March 31 2009 19:10
http://www.ft.com/cms/s/0/22e0122a-1e1d-11de-830b-00144feabdc0.html

(2)
Gulf Monetary Union: On track in spite of delay
Press Release
Dubai, 29 March, 2009
Dr Jarmo T. Kotilaine, NCB Capital’s Chief Economist.
Unprecedented political resolve looks to stimulate greater integration
http://www.zawya.com/story.cfm/sidZAWYA20090329115107/Gulf%20Monetary%20Union%3A%20On%20track%20in%20spite%20of%20delay
SNIP
“In that sense, the GMU holds the potential to significantly contribute to the emergence of the Gulf as an economic powerhouse of truly global importance.”

(3)
Problematic Banking Systems!
by Professor von Braun
March 28th, 2009
http://www.usagold.com/gildedopinion/rocketschool/20090328.html

(4)
David D. Friedman, “Price Theory: An Intermediate Text”. South-Western Publishing Co., 1986 p. 36 chapter 3 initio (at the start)
http://www.daviddfriedman.com/Academic/Price_Theory/PThy_Chapter_3/PThy_Chapter_3.html

(5)
European Socio-political Alert n°3 London G20 Summit:
Open letter to the G20 leaders: London, last chance before global geopolitical dislocatio
Written by Franck Biancheri – Newropeans
Tuesday, 24 March 2009
http://www.newropeans-magazine.org/content/view/9158/1/

(6)
Ökonomen bringen neuen Gold-Standard ins Spiel
(164)
Von D. Eckert und H. Zschäpitz 30. März 2009, 17:51 Uhr
http://www.welt.de/finanzen/article3471205/Oekonomen-bringen-neuen-Gold-Standard-ins-Spiel.html#vote_3473291
SNIP
Bei den großen Weltdevisen Dollar und Euro sind in den letzten Wochen
schwere Verwerfungen zu beobachten. Verbraucher fürchten um die
Kaufkraft ihres Geldes und den Verlust ihrer Ersparnisse. Um eine
Inflation wie in Simbabwe zu vermeiden, schlagen Ökonomen eine Bindung
der Währungen an Gold vor.

(7)
With Chinese Freegold from a reserve currency to a world standard
Tuesday, 2 September 2003
http://www.free-europe.org/english/2003/09/with-chinese-freegold-from-a-reserve-currency-to-a-world-standard/

(8)
G20 goal to ‘clean up banks’ – PM
Page last updated at 03:22 GMT, Tuesday, 31 March 2009 04:22 UK
http://news.bbc.co.uk/2/hi/uk_news/politics/7973305.stm
SNIP
The main aim of the G20 summit must be to “clean up” the global banking system, Gordon Brown will say later today.
Ahead
of Thursday’s crunch meeting of world leaders in London, Mr Brown will
say it is vital banks relearn common values like honesty and
responsibility.