Posted by Ivo Cerckel on 23rd January 2012
As long as Ron Paul does not take office as president of the USA, and puts an end to “our” debt-driven political economy, it will be necessary to consolidate your wealth in gold metal, not in the synthetic fiat-dollar storage which is dishonestly being administrated by the Federal Reserve.
replaces the necessity to check whether the Federal Reserve bureaucrats exercise or perform their duties with the reasonable care
Freegold on the USA Treasury and/or Federal Reserve balance-sheet would act as a stabilizer of the value of the dollar.
By declaring the USA gold reserves at Fort Knox to be an item not related to monetary policy operations,
the Ron Paul presidency will erect a wall between the gold component and the paper component of the dollar
so that even if no brakes are put on the rapidly expanding money supply,
Americans will have enough confidence in those gold reserves
to have the self-confidence required to use dollar-paper as a store of value,
thereby, i.e. by the use of that paper, building confidence in each other.
LET ME EXPLAIN
Newt Gingrich had a triumphant victory in the South Carolina Republican primary on Saturday. The victory was however a surprise as Mitt Romney was expected to win. The race for the Republican nomination is now wide open. It should moreover not be forgotten that only a little over one percent of the delegates have been awarded. The race is a marathon, not a sprint, and Ron Paul, who ended fourth and last in South Carolina behind Rick Santorum, Mitt Romney, and Newt Gingrich is just getting started. Florida is just around the corner on January 31, with caucuses in Nevada, Maine, Colorado, and Minnesota following right on its heels. On March 06, hundreds of delegates will be up for grabs on Super Tuesday with elections in multiple states, including Virginia, where it’s a two-man race between Ron Paul and Mitt Romney.
As long as Ron Paul does not take office as president of the USA, and puts an end to “our” debt-driven political economy, it will be necessary to consolidate your wealth in gold metal, not in the synthetic fiat-currency paper-storage which is dishonestly being administrated by the USA Federal Reserve.
The only thing president Paul will have to do is to declare, like the European Central Bank, the USA gold reserves – if any – still held at Fort Knox, to be an item not related to monetary policy operations and to (quarterly) mark these reserves to market (mark to market – MTM),
just like the gold reserves of the Eurosystem,
not to the Bretton-Woods model of $42.2 (originally at Bretton Woods $35), like the USA Treasury and/or Federal Reserve is doing now.
In that way, a firewall will be erected between the gold component and the paper component of the dollar. (More about this firewall later in this blog post).
Ron Paul said in the USA congress in 1980 that he would be delighted with a serious consideration of any form of commodity-backed currency that would put brakes on the rapidly expanding money supply. (1)
The old gold-standard could indeed not change human nature which dictates that no ruler can withstand the pressure to print more receipts than he has gold in reserve. The old gold-standard did moreover not provide for the possibility that an increase of the ounces, kilograms, or tons of gold held in reserve would lead to an increase in the currency’s value. Its chief weakness was however that it could be repealed by the politicians. (2)
Freegold forces the bureaucrats who are charged with the administration of the dollar to stop dishonestly performing this administration and to start doing this in a responsible way.
It forces them to exercise or perform their duties with reasonable care.
Faced with the known problem of human nature which dictates that no ruler can withstand the pressure to print more receipts than he has gold in reserve,
the bureaucrats administrating the dollar could be forced to demonstrate they exercised reasonable care in trying to prevent this problem..
It is however easier to prevent the problem which arose under the old gold-standard from arising in the first place.
FreeGold means that the euro has a gold component and a paper component, and puts a “firewall” between both so that gold’s valuation as a wealth-preserving asset cannot be pulled lower by the inevitable inflation of the paper component of circulating currencies. It is the (quarterly) marking to market (MTM) of the gold reserves of the Eurosystem, not to the model of $42.2 like the USA central bank (originally $35), by the Eurosystem which provides that wall.
Gold is an item not related to euro monetary policy operations.
The euro and Freegold are coexisting to supplement each other, without interacting with each other. That’s how the polity achieves its democratic legitimacy. Just like Charles-Louis de Secondat, baron de La Brède et de Montesquieu (1689 – 1755), divided government power into three branches and called his idea the “separation of powers”, so does Freegold separate the gold component and paper component of the currency. Whereas Montesquieu freaks have never been able to find a way to make sure that the separation of powers is not being violated, the MTM-firewall guarantees that the separation is not a vain word..
Gold on the European Central Bank balance-sheet is these days acting as a stabilizer of the value of the euro vis-à-vis the dollar
notwithstanding the debt problems encountered by the banksters and guv’mints established on euroland, on the one hand,
and notwithstanding, on the other hand, AND MORE IMPORTANTLY, the fact that the ECB is printing euros for its lunatic quantitative-easing programs.
Notwithstanding the fact that the ECB is printing euros for its lunatic quantitative-easing programs,
the exchange rate of the euro vis-à-vis the dollar does NOT suffer.
This is BECAUSE gold on the ECB balance-sheet is these days acting as a stabilizer of the value of the euro.
Gold on the ECB balance-sheet replaces the need to check whether the administrators of the euro exercise or perform their duties with reasonable care.
By putting an end to our political-debt driven economy, the Ron Paul presidency of the USA will make it possible for Jane and Joe to consolidate their wealth in green paper.
A FOREIGN POLICY OF FREEGOLD
For Ron Paul, one of the reasons people succumb to dangerous policies of war and conquest is related to the false sense of patriotism promoted by the USA politicians. Most Americans do not want to appear weak, they enjoy expressions of strength and bravado. They fail to understand that SELF-CONFIDENCE and strength of conviction place restraints on the use of force, that peaceful solutions to problems require greater wisdom than unprovoked force. (3)
The first European Central Bank president, the late Dr Willem F. Duisenberg, asked in his May 09, 2002 Acceptance speech of the International Charlemagne Prize of Aachen for 2002 “What is money?”
And he replied that money is a social contract.
“What is money? Economists know that money is defined by the functions it performs, as a means of exchange, a unit of account and a store of value. But, just as importantly, money is also defined by the community for whom it performs these functions. Because it is an economic instrument for each of its users, it is also a political and cultural bond between them. Consider this simple fact: we engage in an exchange of goods and services everyday by using money as the means of exchange; and we offer our labour in exchange for money, which, in itself, has no value. We only do this because we believe that we will, in turn, be able to exchange that money for more goods or services. This fact tells us much about the confidence that we place in money itself. And it tells us much more about the CONFIDENCE that we place in each other. Hence, money is, in essence, a social contract.
The euro, probably more than any other currency, represents the mutual confidence at the heart of our community.” (4)
For Ron Paul, many Americans fail to understand that self-confidence […] place[s] restraints on the use of force
For Wim Duisenberg, the simple fact that we engage in an exchange of goods and services everyday by using money as the means of exchange, tells us much about the confidence that we place in money itself, and it tells us much more about the confidence that we place in each other.
If we have confidence in each other (Duisenberg), we don’t use force against each other (Paul).
Duisenberg continued in his Charlemagne speech:
“[The euro] is the first currency that has
not only severed its link to gold,
but also its link to the nation-state.” (4, again)
It is the severance of this link to gold which provides the firewall, about which I spoke earlier, between the gold component and the paper component of the euro.
Gold is an item not related to euro monetary policy operations.
THE PROOF IS IN THE PUDDING
You don’t believe me?
Go in the press room on the ECB website to its January 04, 2012 press release “Consolidated financial statement of the Eurosystem as at 30 December 2011″,
you will find under the
“Items not related to monetary policy operations”
[I cannot help but draw the reader’s attention to the fact that since the euro has severed the link from gold, gold is an item "not" related to monetary policy operations.]
“In the week ending 30 December 2011 the increase of EUR 3.6 billion in gold and gold receivables (asset item 1) reflected quarterly revaluation adjustments, as well as [....]”
[the reader will notice that gold thus gets quarterly marked to market]
this asset item 1 “Gold and gold receivables” had at the end of December 2011 a value of
423’458 X 1 million euro
and that the value of the total assets of the Eurosystem at the end of December 2011 was
2’735’628 X 1 million euro. (5)
This means that gold constitutes (42’345’800 / 2’735’628 = ) 15 % of the Eurosystem’s total assets – the percentage still rising with the rising price of gold.
Just like the view of money as the institution of or, rather, for debt settlement, so is monetary “nominalism” a theory advocated mainly by lawyers.
The theory says that what defines a currency is its name (e.g.: dollar, euro, renminbi) not its purchasing power. (6)
By severing the link from (the nation-state and thus from) nominalism,
the euro founding fathers,
not to be confused with, Jean Monnet (and Robert Schuman), the founding fathers of European integration,
have said that the euro is defined by its purchasing power,
not by the euro convergence criteria.
Ron Paul would be delighted with a serious consideration of any form of commodity-backed currency that would put brakes on the rapidly expanding money supply. (1, again)
Ron Paul promotes Freegold.
Freegold is the “monetary theory”, if I may call it like that, advocated by the founding fathers of the euro.
Freegold replaces the necessity to check whether the Federal Reserve bureaucrats exercise or perform their duties with the reasonable care.
Freegold on the USA Treasury and/or Federal Reserve balance-sheet would act as a stabilizer of the value of the dollar – even if no brakes can be put on the rapidly expanding money supply
Congressional Record – USA House of Representatives, July 1, 1980
reprinted in: Ron Paul, “Pillars of Prosperity – Free Markets, Honest Money, Private Property”, Auburn, Alabama: Ludwig von Mises Institute, 2008, 116, p. 121
Roland Leuschel and Claus Vogt, “Das Greenspan Dossier, Wie die US-Notenbank das Weltwährungssystem gefährdet. Oder: Inflation um jeden Preis”, finanzbuchverlag.de, 2006, 3rd ed., pp. 300 and 304
Ron Paul, “A Foreign Policy of Freedom – Peace Commerce, and Honest Friendship”, Lake Jackson, Texas: Foundation for Rational Economics and Education, 2007, p. 361
International Charlemagne Prize of Aachen for 2002
Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002
4 January 2012 – Consolidated financial statement of the Eurosystem as at 30 December 2011
Philippe Malaurie, Laurent Aynès et Philippe Stoffel-Munck, “Les Obligations”, Paris, Defrénois, Lextensio Editions, 2011, text before section 1097