Currency hegemony is the imposition of a currency, even gold (at a stated currency price, of course), on the population. Such an imposition is in fact precisely the opposite of allowing the parties to a sales contract to freely determine the contents of the contract.

Although article 4 of the 1999 Contract Law of the People’s Republic of China provides that “a party is entitled to enter into a contract voluntarily under the law and no entity or individual may unlawfully interfere with such right”,

the programme of the 14 March 2013 FT Standard Chartered Taiwan Economic Summit says that currently only a tiny amount of the USD 120 billion in trade between China and Taiwan is settled in renminbi.(1)

The programme continues by saying that a major opportunity for Taiwan may be generated by the further internationalisation of the said renminbi.
http://www.ft-live.com/fttaiwan

Notice immediately that the debate at the Summit concerns renminbi “internationalisation”, not renminbi “convertibility” – into pieces of scrap, a.k.a. USA dollars.

MENG-TZE

What is money? And what is [the renminbi as] a currency?

As Mencius (Meng-Tze) (372 – 289 B.C.), who studied with the great-grandson of Confucius (2) and became the foremost follower and greatest developer of the orthodox teaching of Confucius (3), taught: “wherever there are things and affairs, there must be their principles.” (4)

Aristotle (384 – 322 B.C.), who like the elder Plato (429 – 347 B.C.) was a contemporary of Mencius, saw “substance” as the root of the intelligibility of the world and went on to define the “substance” of a thing as its “essence” by which the thing is differentiated from other things due to its nature which “specifies” it. (5)

For “essence”, Aristotle gave the “what-it-was-to-be-that-thing” as definition. (5, again)
By using a phrase in this way in the grammatical role of a noun, this definition is as unnatural in Greek as it in English.
The definition suggests the idea of what something was all along going to, destined to, become. (6)

Could it be that money [as opposed to currency] is a good readily acceptable in exchange by everyone in a given geographical area and is sought for the purpose of being re-exchanged (7) and that gold was all along going to, destined to, become money?

Could it also be that when English speakers say that something has “currency”, they mean that it is in the state of being current; that it is in the state of being in general acceptance or … “recognition”?

Xinhua reported on 22 February 2013 that according to Peng Xingyun, a researcher and financial specialist at the Chinese Academy of Social Sciences, the developments in renminbi internationalisation may indicate a rising “recognition” of the currency worldwide. (8)

This seems to indicate that before the renminbi can be recognised as an “international” currency, it must be recognised as a “currency”.

MONETARY ANCHOR

Money must have an anchor, an anchor in reality, not in the mind. Not a nominal anchor, not an anchor in name only. Money cannot be itself the anchor if it has no reality. Money cannot be itself the anchor if it exists only in the (digital) mind. The reason why money needs an anchor is not to evoke, not to bring into the mind, the gold standard, but to anchor money by providing for a Wealth Asset that stands Beside Money, yet has no official connection to money, hereafter a WABM. Calling this process “anchoring” relates to the way that ships down anchor to keep themselves in a specific place to avoid drifting way.

The last remnant of the gold standard disappeared on 15 August 1971 when USA president Richard Nixon broke the 1944 Bretton Woods Agreement. This Agreement, which established the International Monetary Fund (IMF), said that the IMF’s only task was to maintain the Agreement. As the Agreement did no longer exist, the IMF should have been repealed in August 1971.

The Agreement linked the USA dollar at fixed parity to the price of gold and all other currencies to the said dollar. On 15 August 1971, Nixon broke the Agreement. Since then, the value of the USA dollar is determined by … nothing. The USA of course never (dare to make explicit that it) severed the link of the USA dollar to gold. Nay, after making sure that article IV, section 2, (b), of the IMF Articles of Agreement does prohibit members from linking their currencies to gold, the USA managed to give new tasks to the IMF so that it could be kept in existence.

Middle East oil producers could therefore obtain less gold than before with the USA dollars received for their oil. Out of love for gold, they were thus forced to increase their prices which caused the first oil crisis in 1973.

China doesn’t declare its gold purchases, but it is an open secret that its People’s Bank is buying on every dip, as they have to do merely to keep the proportion stable at 2 percent of their USA dollar 3.3 trillion reserves, said a London newspaper on 21 February 2013. (9)

The old “fixed” gold-standard could not change human nature which dictates that no ruler can withstand the pressure to print more receipts than he has gold in reserve. (10)
The old “fixed” gold-standard was faced with the problem of matching the amount of gold in the treasury to the “fix”. To make the money stronger, one had to bring in gold, as it took twice as many ounces to back a currency “in circulation” at USD 10 as it did at USD 20. The reverse is true when lowering the money value to USD 40. Then, one half the gold backing had to be removed as only half was now needed to back the USA dollar. (11)
Its chief weakness was however that it could be repealed by the politicians. (10, again)

Since, on the one hand, a monetary system must have an anchor, but since, on the other hand, a fixed gold-standard, is affected by many weaknesses, the only way a monetary system can work is if anyone, anywhere, be able to exchange the currency for gold, not at a fixed rate, but at a floating rate.

This is “Freegold”, the free exchangeability “at will” of a (any?) currency into gold. I say free exchangeability “at will” into gold. I don’t say free exchangeability “on demand” into gold, as “on demand” would imply that somebody – most likely the issuer of the currency – can be forced to exchange his gold for currency.

FREEGOLD

On 01 January 1999 a fresh form of currency, the euro, was introduced.

In his 09 May 2002 Acceptance speech of the International Charlemagne Prize of Aachen for 2002, European Central Bank (ECB) president, the late Dr Willem F. Duisenberg said:
“The euro probably more than any other currency, represents the mutual confidence at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state.” (12)

Dr Duisenberg was here saying that the euro, the new medium of exchange, is to co-exist with Freegold, as a store of value. Freegold will be a gold-based currency valuation system where the currency is not tied to a fixed amount of gold. This will entail a free-floating price of gold whereby gold will not be money, but a physical wealth consolidator, a WABM into which you can transform your wealth in order to maintain its purchasing power and to prevent it from vanishing into thin air.
Remember that a WABM has no official connection to money.

By the same token, Duisenberg challenged USA-dollar hegemony, confirming to the planet that not only had the currency of which the ECB is the guardian severed the link to the nation-state but that the ECB was also prepared to utilise gold as a “currency without a country” to act as a reserve for interventions if required — a breakthrough. (13)

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 (the European System of Central Banks) not to the model of USD 42.2 like the USA (originally, in 1944, when Bretton Woods came into force, USD 35), by the Eurosystem which provides that wall. Gold is an item not related to euro monetary policy operations.

By trading behind the MTM firewall, not behind a fiat-monetary firewall, the euro is trying to achieve Freegold and return gold to its status as a WABM, an asset itself, not a claim on assets.
Remember that a WABM has no official connection to money and that a WABM is a Wealth Asset that stands Beside Money.

Once Freegold will have been achieved, the gold reserves in the strong-rooms of the Eurosystem will fulfil the same role as the Mona Lisa in the Louvre museum in Paris, a wealth reserve, a WABM, in the strong-room (the Louvre) of a monetary union.

That’s a model which the People’s Bank of China could be following.

Whether the Bank is following the model, I don’t know.

CONTRACT VOLUNTARINESS

If money needs an anchor, so does contract law.

Freedom of contract became the “anchor” of modern contract law after the French Civil Code was adopted in 1804. (14)

Article 1134 of the said Code provides that the agreement entered into between parties is the law governing the relationship between the parties [...].

Does Chinese contract law allow for the inclusion in an international trade contract of a clause stipulating that payment shall be made in Another currency than the USA dollar – the currency imposed by trade usages?

I said at the outset that article 4 of the 1999 Contract Law of (the People’s Republic of) China (CLC) provides that “a party is entitled to enter into a contract voluntarily under the law and no entity or individual may unlawfully interfere with such right”.

Dr Junwei Fu of the Beijing Institute of Technology School of Law says that it is often believed by Chinese academic circles that “contract voluntariness” of the CLC is the same as “freedom of contract”. (15)

In order to understand what the Chinese legislator meant with this article 4, the drafting history or drafting process of this article 4 may contain some indications – as to the meaning. And this history or process reveals that “freedom of contract” which was stated as a general principle in a 1995 bill which finally led to the 1999 CLC was already revised in a 1997 bill and was finally rejected and replaced in the final 1998 bill by “contract voluntariness”, says Dr Fu. (16)

This seems to indicate that “contract voluntariness” is NOT the same as “freedom of contract”.

While European “freedom of contract” acknowledges, among other things, the freedom to choose the other contractual party and to conclude and determine the contents of a contract (17), Chinese “contract voluntariness” is much narrower and essentially limited to the autonomy to enter into a contract. (18)
Conversely, the exceptions to European “freedom of contract” are much narrower than the exceptions to Chinese “contract voluntariness”.

When European legal systems say that contracts must respect “public order” and “good morals”, those two concepts are always defined in a narrow way in order to respect the will and freedom of the parties. (19)

In China due to the influence of Confucianism and a historically planned economy, it is necessary for the state to exercise intervention measures to ensure that contracts are not disturbing the “socio-economic order”. (20)

“Disturbance of the “socio-economic order” or disruption of the State economic plan by any organisation or individual is prohibited”, says article 7 of the amendment to the Constitution of the People’s Republic of China (Adopted at the First Session of the Eighth National People’s Congress and promulgated for implementation by the Announcement of the National People’s Congress on March 29, 1993).

Is the USA dollar regime a constitutive part of the Chinese socio-economic order?

TRADE USA-GES

Chinese law of contracts consists of default rules and mandatory rules. The first ones can be excluded by the parties whereas mandatory rules are widely accepted to be a limitation to the freedom of contract since contractual parties cannot avoid them in the agreement. (21)
Since China has signed “numerous” international treaties impacting the parties concluding the contract, the mandatory rules in those international treaties cannot be violated by the individuals. These treaties are given priority over national law. (22)

China has signed the 1980 Vienna Convention on the International Sale of Goods.
This Convention is not mandatory in character and article 6 provides that parties may exclude its application altogether. (23)

Trade usages and trade terms play however an important role in international commercial law, and for a convention to be successful it needs to be sympathetic them. [... At the negotiations leading to Vienna Convention,] Socialist countries were wary of trade usages since they preferred the contract to be secure and certain so that the parties are not taken by surprise, especially where local usages are adopted. [...] This does not mean that Socialist countries did not recognise trade usages. By and large they do, provided they are widely “recognised” – that is, internationally well-known – clear and certain. (24)

Does payment in USA dollar, not in Zimbabwe dollar, the official currency of Zimbabwe from 1980 to 12 April 2009, make the contract secure and certain?

Payment in USA dollar is deemed to be payment in a known – should I say “recognised”? – “hard” currency, which currency is not subject to surprises – such as being reduced to its intrinsic value, the paper it is printed on and the green ink, of course – that’s the way to test whether the USA dollar is a “hard” currency.

And what about the payment for the shipping of the goods to and from Taiwan and China? Also in USA dollars?

In international law concerning carriage of goods by sea, there are standard forms of contract which include “freight clauses”, that is, additional clauses which will normally make provision for the currency in which the freight is to be paid. In a period of fluctuating exchange-rates [such as in 2013] this is a matter of particular importance to the ship-owner, especially where the expenses of the voyage are likely to be incurred in a different currency. (25)

Will the carrier also have to accept USA dollars?

This becomes hilarious.

Moreover, if Taiwan and China do a good job of manufacturing and run a balance of trade surplus they are receiving more USA dollars than they are spending.
What can or should they do with those excess USA dollars they are receiving in their trade exchanges with the planet?

If Taiwan and China allow those USA dollars to flow back into the world markets (actively buying Taiwan dollars c.q., renminbi with those USA dollars) this would raise the NTD c.q. RMB exchange-rate and penalise the international pricing structure of their goods. Their goods would cost more and slow down their exports.

Yet, since Taiwan’s and China’s currency management is strong (like that of euroland) and their people (read that economy) work better than their foreign competitors (including those from euroland) the exchange-rate system shouldn’t hurt the price of Taiwan’s and China’s goods. But, it does.

You see, selling these extra USA dollars today has the effect of hurting a competitive producer that has good money management.

The only alternative for Taiwan and China is to save those USA dollars, thereby supporting the USA dollar regime. (26)

Is that the way (the original 1944 or) the post-1971 Bretton Woods regime was supposed to work?

Or is that the result of machinations by the USA dollar regime?

See also my
Freegold ?????
Posted by Ivo Cerckel on August 8th, 2012
http://bphouse.com/honest_money/2012/08/08/freegold-%E5%92%8C%E5%9B%9E%E5%BD%92%E5%AE%9A%E7%90%86/

Ivo Cerckel
ivocerckel@yahoo.com
https://twitter.com/IvoCerckel

NOTES

(1)
FT Standard Chartered Taiwan Economic Summit 14 March 2013
https://www.etouches.com/ehome/52414/98778/
SNIP
4:05 pm – 5:05 pm
Moderator: Gideon Rachman, Chief Foreign Affairs Commentator, Financial Times
Panel Discussion: Financial Market Innovation – Taiwan as the next offshore Renminbi Centre and the impact on Taiwan’s businesses
SNIP
Currently only a tiny amount of the U.S.$120 billion in trade between China and Taiwan is settled in renminbi.

(2)
Alfredo P. Co, “The Blooming of a Hundred Flowers -Philosophy of Ancient China”, Manila University of Santo Tomas, 1992, p. 303

(3)
Dr Charles McGruder, professor of philosophy, Mt. San Antonio College, Los Angeles, California, USA, “Mencius”, handout (to students), without date,
http://faculty.mtsac.edu/cmcgruder/mencius.html

(4)
Mencius, “Book of Mencius”, Book VI, Chapter 1, point 6

(5)
Aristotle, “Metaphysics”, Book VII, Chapter 4

(6)
Hugh Lawson-Tancred. “Introduction”, in: Aristotle, “Metaphysics”, Penguin Books, 1998, updated bibliography 2004, xi, p. xxx
http://bphouse.com/honest_money/2009/10/15/the-substance-of-the-gcc-single-currency-reserves/

(7)
George Reisman, “Capitalism – A Treatise on Economics”, Ottawa, Illinois, USA, Jameson books, 1998, 3rd ed., p. 142

(8)
Currency expands its reach
English.news.cn 2013-02-22 10:28:09
By Wang Xiaotian in Beijing and Cecily Liu in London
http://news.xinhuanet.com/english/china/2013-02/22/c_132184771.htm

(9)
Gold’s Death Cross is a buy signal for China
By Ambrose Evans-Pritchard
Last updated: February 21st, 2013
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022953/golds-death-cross-is-a-buy-signal-for-china/

(10)
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

(11)
ANOTHER (THOUGHTS!) ID#60253:
The Management of Gold, A Simple Tool for the 90s
(ANOTHER (THOUGHTS!)
Foundational Gold Trail Commentary
The Inside Story on the Gold-for-Oil Deal that could Rock the World’s Financial Centers
– Page Three -
Mar ’98 – Apr ’98
Date: Sat Mar 07 1998 13:08
http://www.usagold.com/goldtrail/archives/another3.html

(12)
International Charlemagne Prize of Aachen for 2002
Acceptance speech by Dr Willem F. Duisenberg,
President of the European Central Bank,
Aachen, 9 May 2002
http://www.ecb.int/press/key/date/2002/html/sp020509.en.html

(13)
FOA (05/08/01; 09:59:55MT – USAgold.com msg#70)
A Tree in the Making #02
(The Gold Trail:- The Message of an Evolving Market – Walking the Gold Trail Using the “Thoughts! ” of ANOTHER. “Nearing the Great Divide…?”, the Fourth Archive for “Walking the Gold Trail”
http://www.USAgold.com/goldtrail/archives/goldtrailfour.html

(14)
Junwei Fu, “Modern European and Chinese Contract Law: A Comparative Study of Party Autonomy”, Alphen aan den Rijn (The Netherlands), Wolters Kluwer – Law and Business, Kluwer Law International, 2011, p. 134

(15)
Fu, op. cit., p. 40

(16)
Fu, op. cit., p. 41

(17)
Fu, op. cit., p. 67

(18)
Fu, op. cit., p. 40

(19)
Fu, op. cit., p. 47

(20)
Fu, op. cit., p. 41

(21)
Fu, op. cit., p. 152

(22)
Fu, op. cit., p. 151

(23)
Indira Carr, “International Trade Law”, London & New York, Routledge-Cavendish, 2010, 4th ed., p. 68

(24)
Carr, op. cit., p. 70

(25)
John F. Wilson, “Carriage of Goods by Sea”, Pearson Education, 2010, 7th ed., p. 50

(26)
FOA (09/16/00; 15:11:26MD – usagold.com msg#38)
After six miles we arrive at the burial tree!
(The Gold Trail:- The Message of an Evolving Market – Walking the Gold Trail Using the “Thoughts! ” of ANOTHER, “The Long and Winding Road…” the Second Archive for “Walking the Gold Trail”
http://www.usagold.com/goldtrail/archives/goldtrailtwo.html

I did follow the goldtrail and I learned a lot from it. Still considering political actions I think it is way too good to be true and unhandy for TPTB. If you dont mind me playing the so called advocate of the devil. The mail theses of freegold is that oil goes to EU(ro) instead of Dollars. For some reason the EU(ro) enjoys attacking countries who like other settlement then Dollars. Iraq, Iran, Libya come to mind. The damage it does to the EU(ro)pean economy isnt a problem at all for them EU(ro) leaders.

Another claim was made by Mr. Duisenberg. The EU(ro) is the first country to sever the link between gold and nation states. Somehow it turned into a giant ponzi pump and dump currency. Nation states still have to bail out failed banks. No seperation there. Hence goldman sacks at the wheel. And boy does Mario the destroyer love it.

By the way, Iam sure you know the EU(ro?) was set up by US intersts. Way easier to destroy them and make them support the dollar that way (by making them buy subprime morgages, derivatives that wont pay out etc).

That were some general statements. Now to your points to Mr von Rompuy;

….”That they do not consider the fact that the ECB has gold on its balance sheet important?”
They dont think that is important. They know the EU(ro) central bank reserves are for the most part paper gold reserves. There is a reason non of the EU(ro)pean CB’s have their gold audited. Nor does the ECB. Posession is 90% of the law as you know. The FED has defaulted on once 100% and once partially on gold and nothing happened. Good incentive to just take the gold from European central bankers. What they gonna do? Good weapon against the EU(ro) if you pull the gold card, your gold is gone and EU(ro)pe goes 3th world instantly.

”BUT whether GOLD {real money, not cash] increased or decreased.”
Even the ECB had to admit it decreased since the introduction of the EU(ro) (in ounces). I bet they also commit huge accountingfraud since they allow ”mark to fantasy”. Adding extra damage to their balance sheet to the papergold they have on their balancesheet. I think thats the reason they had a paperman from Goldman Sachs as ECB man and joined forces with the USA to keep the EU(ro) position by force, threats etc. See the still hidden threat letter to the Irish.

”SHANGHAI: The Shanghai Gold Exchange plans to launch over-the-counter gold trading”
Smart move, more paper gold not on the balance sheets. How much leverage u think they will take on? Seems the Singapore rulers also moved away from freegold just as the EU(ro) did.

”performs the regulated functions stipulated by Management Rules of Gold Exchange and organizes gold transactions with the principle of openness, fairness, justness and honesty.”
Lol, you got to be kidding right?

”The euro is the first currency that has not only severed its link to gold, but also its link to the nation-state.”
As I explained above it didnt. What mr Duisenberg could have better said is what mr Carroll Quigley in the 1960 era already stated (mentor of mr Clinton);

The goals of the dynastic bankers have been nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalistic fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. he apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s
central banks which were themselves private corporation.

The EU(ro) achieved that goal as the first!

”The reason is not that there is too few but too much demand for gold. Due to the high demand, 10 to 14,000 metric tonnes of paper gold contracts have been signed since 1980.”
There is huge demand for paper gold. Not real gold. Iam sure it will fail someday. And will restart, like any force majeur event. If there is indeed a huge demand of real gold. I bet that its EU(ro)pean gold.

Sometimes I think the EU(ro) with this design was created (inc the big delay) was to keep the world patient for a way long time and keep the Dollar so they could do what they did.

anyway, the 2 advocate of the devil cents. Dont worry, I really like gold and consider it the only real money. Keep up advocating freegold.

regards Hugo

As professor John Farrar puts it on p. 125 of the first edition his “Company Law” (London, Butterworths, 1985):

CAPITAL

ORIGINALLY
this notion of capital was confined to loans of currency
In the Guild system:
little need for capital stock
the principal asset of the business was the skill and connections of the tradesman.
the only capital he needed was to build or rent a house, purchase tools or stock and set himself up

LATER
the notion of capital took in other assets and acquired a wider meaning than loan
word became adjective
capital stock
the funds or quantity of money the companies are by their charter allowed to employ in trade
16th century: growth of the capitalist class
==>
concept of capital as a FUND OF MONEY

This development was facilitated by the removal of the prohibition on usury.
For a time, such capitalists ran the risk of being held to be partners.
The “commenda” never gained a strong foothold in English law because of the backwardness of the English accounting system,

As yours truly put it 25 years ago on p. 29 of his unpublished LL.M. dissertation at Exeter University “A Critique of the Role of Harmonisation of European Company Law” quoting the late Leuven professor Jan Ronse, “Algemeen Deel van het Vennootschapsrecht”, Leuven, Acco, 1975, pp 10-16:
The general partnership and the limited partnership originated in the medieval customary lawe.
The general partnership originated like the “societas fratrum” from the continued estate of a “pater familias”
but departs from it by important rules which derive from the fact that it was intended to carry on a commercial business.
The “commenda”, the limited partnership, was a company whose structure was based on a separation of ownership and control.
It was a contract by which one or more persons (“commendatores”] entrusted (“commendare”) money or goods to merchants by way of commission or mandate in order to trade overseas.
This contract of “commenda” was introduced in the 12th century by Italian merchants [like those founding bankster Monte dei Paschi di Siena?] who created this limited partnership to attract capital from investors who did not desire any role in management or any responsibility for decision-making.
This contract resulted in the creation of a company with two different kinds of partners:
one or more general partners whose liability was unlimited
and
one or more silent partners who participated in the risk of the enterprise only to the extent invested.

END OF QUOTE FROM THE DISSERTATION

Leuven is a Catholic University.

As Saint Thomas Aquinas, who lived in the thirteenth century (1225–1274), i.e., just after the “commenda” had been created, puts it in His Reply to the Fifth Objection of Article 2 of Question 78 of the Second Part of the Second Part (yes, the Second Part has again two Parts) of His “Summa theologiae” :

Reply to Objection 5. He who lends money transfers the ownership of the money to the borrower. Hence the borrower holds the money at his own risk and is bound to pay it all back: wherefore the lender must not exact more. On the other hand he that entrusts his money to a merchant or craftsman so as to form a kind of society, does not transfer the ownership of his money to them, for it remains his, so that at his risk the merchant speculates with it, or the craftsman uses it for his craft, and consequently he may lawfully demand as something belonging to him, part of the profits derived from his money.
http://www.newadvent.org/summa/3078.htm

Summa theologiae IIa IIae, qu. 78, art. 2,
Ad quintum dicendum quod ille qui mutuat pecuniam transfert dominium pecuniae in eum cui mutuat. Unde ille cui pecunia mutuatur sub suo periculo tenet eam, et tenetur integre restituere. Unde non debet amplius exigere ille qui mutuavit. Sed ille qui committit pecuniam suam vel mercatori vel artifici per modum societatis cuiusdam, non transfert dominium pecuniae suae in illum, sed remanet eius, ita quod cum periculo ipsius mercator de ea negotiatur vel artifex operatur. Et ideo licite potest partem lucri inde provenientis expetere, tanquam de re sua.

Enough said.

Do my homework, yourself!

This chapter was written by professor Paul De Grauwe, says the table of contents of the 2010 edition.

As The Economist puts it:
Worse, the costs of pursuing the banks for wrongdoing are difficult to contain: uncertainty over legal risks may make it harder for them to attract capital, which would affect their capacity to lend. Only the late-night lawyers will be happy with that.
(The Libor scandal
Year of the lawyer
Banks face another punishing year of fines and lawsuits
Jan 5th 2013 |From the print edition
http://www.economist.com/news/finance-and-economics/21569053-banks-face-another-punishing-year-fines-and-lawsuits-year-lawyer

Is that not the same with currency?
We are told that the USA dollar is backed by the
- wealth-producing capacity of the USA
- capital of the country (wealth-producing capacity, not the capital city, ‘hoofdstad’ if you happen to read Dutch – how much is the country worth
WHEREAS
it should be backed by its gold reserves.

Banks originated as warehouses.

As Roland Leuschel puts it
banks used to have the right to issue receipts for the gold, hiding in oil, they held in reserve. This right was taken away from them by the institution of central banks.
(Roland Leuschel and Claus Vogt, “Das Greenspan Dossier, Wie die US-Notenbank das Weltwährungssystem gefährdet. Oder: Inflation um jeden Preis”, http://www.finanzbuchverlag.de, 2006, 3rd ed., p. 299)

Depositors deposit gold in bank.
Bank issues a certificate of deposit (CD)

Such deposit is not part of the bank’s capital.

EXCEPT
under more common “unallocated” gold accounts,
(January 29, 2013 7:16 pm
Swiss banks lose old taste for gold
By Jack Farchy, Commodities Correspondent
http://www.ft.com/intl/cms/s/0/46c25732-6a10-11e2-a7d2-00144feab49a.html#axzz2JXU7moF3

As I quoted in the post above:
The balance sheet reports financial position. When a comparative balance sheet for two periods is presented, it shows whether cash increased or decreased.
(Charles T. Horngren, Walter T. Harrison and M. Suzanne Oliver, “Accounting”, Prentice Hall, 2009, 8th ed. (as reprinted for the Philippines), p. 710)

Do The Economist and the FT not understand this?

The UK has been marking its gold to market for a long while now, but I noticed in its accounts that all of its gold holdings are now held by the government, rather than the Bank of England (a similar position to the US in that regard). I don’t think they are looking forward to freegold much.

Oddly the UK’s gold reserves (and other reserves) are quoted in US dollars, which doesn’t help matters.

If you don’t accept freegold-discipline, you agree with more debt-mismanagement of all sorts > Economic-monetary-financial !

The old gold-standard was not perfect, but at least it disciplined the monetary authorities in some way.

In order to return to some discipline, the euro has a gold component and a paper component, but puts a “firewall” between the two 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 marking to market (MTM) of the gold reserves of the European System of Central Banksters which providse that wall.

But “they” are only talking about aa firewall, named a Chinese wall”, between the supervisory and monetary roles of the ECB
http://www.economist.com/blogs/charlemagne/2012/09/ecb-and-euro

This diverts the attention of the sheeple.

Neither does, and this is – for me at least – the great surprise,
does this printing of euro seem to be affecting
the value of the euro (– to the extent of the printing).