Basic HTML Version
Their confidence is in gold. At the
other pote of thought is the basic
thesis upon which the Western world
has its confídence- the productive
capacity of the society itself. This
school has been followed diligently
since the early thirties.
A fellow by the name of Keynes
(pronounced Cain's) put this theory
into words in an essay entitled
Auri
Sacra Fames:
"Aimost throughout
the world, gold has been withdrawn
from circulation.
lt
no longer passes
from hand to hand, and the touch of
the metal has been taken away from
men's greedy palms. The little house–
hold gods, who dwelt in purses and
stockings and tin boxes, have been
swallowed up by a single golden
image in each country, which lives
underground and is not seen. Gold is
out of sight- gone back into the soil.
But when gods are no longer seen in a
yellow panoply walking the earth, we
begin to rationalize them; and it is
not long before there is nothing
left."
While succinctly pointing out the
fallacy of trusting in and worshiping
gold as the money god of the past,
Keynes didn't seem to realize that
he was substituting a new god for
the old god! And so today's money
worshipers bow down before the
image of nothing, whereas their pre–
decessors bowed down to the image
of gold!
Since the Keynesian theory is
what we are living under, let's ex–
amine it briefly. Perhaps the key is
provided by the highly respected in–
ternational advisor on finances, Dr.
Harry Schultz. In his circular letter
of October 30, 1969, he states:
' 'Once man introduced money he
introduced speculation. " In other
words, whi le man remained on a
barter systcm, speculation was near–
ly impossible. lf you had ten head
of cattle, you had ten head of cattle,
and there was no way to make ten
head of cattle
appear ro be
a
hundred head!
But a piece of metal was substi–
tutcd as a representation of real
wealth. A piece of metal was ac–
knowledged as being worth so many
head of cattle. Speculators could
then "play the market" with the
metal, since the decision as to
how
The
PLAIN TRUTH September 1979
many
head of cattle it was worth was
arbitrary and decided by men
~n
common agreement. Men could
agree at a
di.fferent worth
for it at
one time than at another;
this is spec–
ulation!
At each stage of the money game
you get further away from a total
grasp of
real
wealth.
" l t
becomes
more and more abstract, until it
reaches the highly sophisticated form
of our rnoney, which consists pri–
marily of numbers on the ledgers of
the banks that maintain our checking
accounts. Although we still use sorne
currency (worth, in reality, no more
than the paper it is printed on) and
sorne coins, most of the money we
spend rnoves from buyer to seller
through the checks that order the
banks to debit one account on their
books and credit another. Thus most
of our money has no real value and
no tangible existence: we can't see it
or feel it or smell it. This is one of the
reasons why its quantity is so diffi–
cult to regulate"
(A
Primer on Mon–
ey, Banking and Gold,
by Peter
L.
Bernstein) .
Funny Money
So we find ourselves in a rather ludi–
crous situation. If you have any mon–
ey in your pocket, take it out and
take a look at it. Since American
currency is the hinge of international
financing, let's see what it says on
American money. On the top of one
side of the paper money you will no–
tice that it says, "Federal Reserve
Note."
1
am now looking at the face
of what we call a five-dollar bill. l t
also says, "This note is legal tender
for all debts, public and prívate."
But what does that
mean?
"The trick in the Federal Reserve
Notes is that the Federal Reserve
Banks lose no cash when they pay out
this currency to the member banks.
Federal Reserve Notes are
not re–
deemable
in
anything
cxccpt what
the government calls ' legal tender'–
that is, money that a crcditor must be
willing to accept from a debtor in
payment of sums owed him. But
since all Federal Reserve Notes are
themselves declared by law to "be le–
gal money, they are really redeem–
able only in themselves! To put it
briefly, they are an
irredeemable
obligation issued by the Federal Re–
serve Banks" (A
Primer on Money,
Banking and Gold).
A few more quotes from this basic
book will help us understand the
money we use a little better. " In
short, the money we use every day,
the money that we are all happy to
accept in payment for goods sold,
services rendcrcd, and debts in–
curred, is
intrinsically worth/ess:
It
has no tangible backing, in the strict
sense of the word" (p. 105).
"When we look back over the
ground that we have covered and ask
what the dollar is really based upon,
we would havc to say that it exists
essentially on
promises and book–
keeping machines"
(p.
107).
"These trends have had another
curious corollary. Whereas the pub–
líe has been feeling more liquid, the
banks have actually been moving into
an increasingly illiquid condi–
tion .... This partially reftects suffi–
cient
confidence
on the part of the
bank officers that the American
economy is now so stable that whole–
sale withtlrawals of cash from the
banking system, as happened in the
1930s, are highly unlikely. But it also
reflects the belief of bankers that
most of the money in time deposits
will stay there instead of moving into
demand deposits where the odds are
much grcater that it will soon be
withdrawn .... Of course, none of
these trcnds nced lead to difficulty
so
long as current palterns prevail.
They suggcst, however, that a rever–
sal of current patterns, promptcd,
perhaps, by rising demand for money
occasioncd by an inftationary cycle,
could
ultimare/y cause a monetary
crisis as intense as anything wit–
nessed in our earlier history"
(p.
154).
"To return to the point from which
we have started: money and gold
have no use or value in themselves.
On the contrary, their value derives
only from what we can buy with
them" (p. 166).
And today your hard-earned dol–
lar or pound is buying precious little
by comparison. The concluding in–
stallment of this article will show you
your best investment
in this era of
shrinking currencies. o
(To Be Conrinued}
13