Home > Miscellaneous Musings > Greenbacker vs. Goldbug Debate

Greenbacker vs. Goldbug Debate

The general public doesn’t realize it yet, but the first salvos have been fired in the most important debate of our generation.

The fight is over what will replace the current decaying, decrepid financial system.

You can view commentary on the debate here and here.

My take on this is simple.

First, you need to understand the various forms of money.  There are three forms of money, and only these three:

1.  Interest-bearing debt money as the primary way of supplying circulating media of exchange into the economy.  The insane system we currently have. Banks issue this toxic shit.  The central banks follow in the trail of the shit to ‘ratify’ the creation of M3 by ‘printing’ e-dollars when the whole thing blows up.  The whole thing is an inherently unsustainable Ponzi-scheme scam, as described here.  Anyone who thinks this particular form of interest bearing fiat/debt/credit money is sustainable needs their head read.  It’s blowing up before your eyes.  Idiots.

For this unsustainable system to keep going, you need a steady supply of insanely optimistic borrowers – suckers – to keep going into debt and replenishing the system with money.  Or psycho governments wanting to bomb another country to bits.  Both insanely optimistic idiots and psycho govts borrow like there’s no tomorrow and – ironically – keep this crazy system going for another day by borrowing like there’s no tomorrow.  But at some point tomorrow comes.  And that’s where we are today.

2.  Interest-free debt-free fiat money.  Pure paper money.  Greenbacks or tally sticks.  Issued by the sovereign.  They can be used to pay taxes, so are valuable because the legal system says they are valuable.  Have been around for hundreds of years.  Forms about 0.5% of our current money supply, but it does still exist as a remnant of our old tally stick culture.  Can work.  Look at England in the Middle Ages, look at China, look at Guernsey, look at the book Web of Debt.  This can also fall into insane hyperinflation in the blink of an eye however.

3.  Free-market money.   Gold and silver and copper and precious metals.  Money as an asset, not representative of a debt.  No one’s liability. Malleable.  Resistant to decay.  Inherently limited supply.  God’s money.  Yes, fractional reserve scams and trade cycles can be overlayed on gold, but there is also a core economy that can chug away independent of the scams because some people will still hold gold at home.  This system allows a shock absorber to be placed between the economy and the financial system.  If the financial system goes wild, we can reel it in by taking money out of the banking system.  If it’s sound, we can give it legs by allowing them to keep our gold.  Checks and balances.  Doesn’t work perfectly, but it has worked pretty well in the past – the whole of the 19th century being a good example.

Now, having understood the choices in front of us, let’s think about the financial system that should support accurate, sound prices.  What monetary system would be most stable?

In order of preference, my choice of monetary system is as follows;

1.  Free market money, including free banking.  We get there by nationalizing bankrupt banks, selling them to the highest bidder, wiping out most or all of the illegitimately created national government debts, removing deposit insurance, and repealing legal tender laws.  Then let the chips fall where they may.

2.  All of the above, but in the end a return to the old government-mandated gold standard and free banking.  Messy and inherently unstable, but doable.   I know because it’s been done before.

3.  Nationalized banking supplying interest-bearning credit, with full reserve requirements on the private banks.  The Ellen Hodgson Brown solution.  The Commonwealth Bank of Australia option.  North Dakota on steroids.  It works.  The government collects the interest as a community re-investment fund and shares the proceeds with the people via lower taxes and new services.

4.  Debt-free money issuance with interest-free fiat money being issued, and full reserve banking. Pure fiat.  The Michael Rowbotham solution.  That’s being partially tried in the US right now with QE essentially allowing the Feds to spend without cost to keep the economy ‘liquid’ but it’s combined with fractional reserve banking so is inherently inflationary.  Nazi Germany – but perhaps this will collapse into Zimbabwe-style inflation pretty quickly.

5.  The current system, which is socialism for the rich and capitalism for the poor.  Moral hazard for the biggest, and life-crushing debt for the rest.

So anything is better than what we have now, but there are better and worse alternatives to what we have now.

I hope for any change.  Anything is better than what we have now, and it’s getting close to the point where the transition costs of experimenting with new systems are worth paying just to get out of the current destructive insane cycle of boom and bust and bust and bust…

Categories: Miscellaneous Musings
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: