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(This item appeared at Forbes.com on May 21, 2024.) The idea of “Sound Money” — this means using gold and silver as money — has been persistently popular among the States for over a decade. Beginning with Utah in 2011, one State after another has removed barriers and impediments to using gold and silver, and digital or other alternatives based on gold and silver, in a monetary role. With over 40 States now having passed some kind of Sound Money legislation, it is now time to take on the Federal government. Representative Alex Mooney (R), of West Virginia, recently introduced the Monetary Metals Tax Neutrality Act, HR 8279, into the US House. The bill aims to repeat, at the Federal level, what has already been accomplished in many States. Article I Section 10 of the US Constitution reads: “No State shall … emit Bills of Credit; make any thing but gold and silver Coin a Tender in Payment of Debts …” The term “Bills of Credit” refers to paper money, which States often used to pay debts in the past, often resulting in terrible inflation and even, in the 1780s, hyperinflation. Today, most people have no clear idea of what the Federal Reserve, and the US Treasury, is actually doing with their money, but they suspect that more monetary inflation is a likely outcome. The principle of allowing the free use of an alternative — we all know there is only one that has been proven to work — gains widespread popular support, among Republicans and Democrats alike. The main difficulty is related to taxes on gold and silver, primarily sales taxes and capital gains taxes. This is related to the categorization of gold and silver as a “collectible,” rather than as a currency like Canadian dollars or euros, which

Several people recommended to me Mike Maloney’s Hidden Secrets of Money documentary. I haven’t watched it yet, but here it is: Watch: Hidden Secrets of Money Also, this book, Pirate Money.

This item is titled “Japan 2023” because I wrote it in August 2023 for my institutional clients. Nevertheless, it has a lot of useful background material on what has been going on in Japan for the past couple decades. This is all a good foundation as, I think, we will witness a period of consequences for Japan going forward from here, over a period of about five years. read Japan 2023 in pdf format In the last twenty years, Japan’s government could have sallied forth and fixed a lot of the problems that have been accumulating over the years. Mostly, this has been intensifying welfare/social security/healthcare burdens, on a weakening economic base. Despite the tendency of governments to adopt an “austerity” response here, which mostly means Higher Taxes, the solution is rather, tax reform which results in lower tax rates, although the revenue/GDP ratio may remain unchanged. But, a much healthier economy would lead to rising GDP, and thus more tax revenue. On the spending side, the main problem, just as in the US and most other developed countries, is legacy social programs, including needs-based welfare, public pensions (Social Security) and healthcare systems that are much too expensive and burdensome. A much better solution has been found by governments such as Singapore, which relies primarily upon Provident Fund systems. These are basically private accounts with mandatory contributions, similar to Payroll Taxes but you get the money in an account owned by you. Singapore has no Public Pension (Social Security) system, but relies on a Provident Fund system that amounts to a mandatory 401(k)-type program. Over a lifetime, even people of modest income can amass quite a lot of assets. There are still needs-based welfare systems for seniors who find that these private accounts prove insufficient. But, the number of such

The USD/JPY rate had an important technical breakdown recently, breaking the 150/USD level that had been defended for some time earlier, and represents a major milestone going back to the 1980s. In the last few days, the Bank of Japan has engaged in large-scale yen-buying intervention, showing just how jittery they are about this. This takes place in context of intensifying expectations that the Bank of Japan will, in time, be pressed into basically buying the government’s bonds, either to keep interest rates down, or to directly finance ongoing deficits. However, the BoJ has not actually been very expansionary with its Base Money supply over the past several years. The “money printing” theme might be real for the future, but the present and recent past does not reveal much base money expansion. The general tone is that the BoJ’s ability to avoid money-printing is coming to an end — which would indeed be a big deal. Here is how it looked as of the end of April. These are Assets, including Total Assets in Green, Government Securities in Blue, and Loans and Discounts in Orange. Liabilities include Current Account balances in Orange, and Currency in Circulation in Blue. The Ministry of Finance’s account is in light blue, and Other balances (I think these are mostly securities brokerages) are in green. So, we can see that Base Money has actually been pretty flat after peaking in 2022. There was a sharp contraction in late 2022, which came about with a big drop in Loans and Discounts, while Securities holdings continued higher. Here are month-end figures, to April 30. We see that Bank Reserves have had a pretty big jump higher in March and April, making new highs at the end of April. After months of flatlining, the Monetary Base is indeed

We saw, in The Magic Formula (now in FREE pdf form), that China didn’t start on its path to becoming a world economic power until it got its currency under control in the mid-1990s — Stable Money. Read The Magic Formula (2019) China also had Low Taxes, with tax revenue/GDP generally under 20%. Russia also has a pretty good tax regime, with its 13% Flat Tax income tax system. However, this is combined with a 20% VAT and a 30% combined Payroll Tax rate, producing a rather heavy tax burden overall. This taxation system is, I would say, quite efficient, using simple taxes at (relatively) low rates and a broad base. Nevertheless, the combination is quite heavy. The ruble currency, however, has been quite unreliable in the past, similar to China before 1995. If Russia is to become a Great Power, it needs a better currency. There are clear steps, recently, toward making gold-based payments systems available in Russia, as an alternative to the unreliable ruble. Maybe, in the not-so-distant future, the ruble will be once again based on gold, as it was in the past. January 29, 2023: Gold Ruble 3.0 How Russia Can Go To A Gold Ruble series With it now difficult to even trade RUB and USD between each other, I think that any USDRUB charts are a little suspect, and easily manipulated. Let’s look instead at a more significant cross rate, RUB and CNY: Well, that has an interesting look to it! This is a pretty good track record of reliability, on this basis, over the past decade. Nevertheless, the RUB still has a bit of a tendency to decline in value. Again, I reiterate that central banks should ignore everything related to interest rates, or various “money supply” indicators in a Monetarist format, and

(This item originally appeared at Forbes.com on April 9, 2024.) This month, the Central Bank of Zimbabwe launched a new gold-based currency, the first gold-based currency from a government since Richard Nixon effectively ended the world gold standard system in 1971. Probably nobody, including me, has very high hopes for this endeavor. After all, Zimbabwe not only had a riotous hyperinflation in 2007-2009, it has attempted six more currencies since then, each ending in disaster. We even included a picture of Zimbabwe’s 100 Trillion Dollar banknote in our book Inflation: What It Is, Why It’s Bad, and How To Fix It. But, you have to agree, nobody has more experience with Inflation: Why It’s Bad, than Zimbabwe. This naturally leads them to ask: What It Is, and How To Fix It. They have apparently ended up with the same conclusion as in our book, which is: link the value of the currency to gold. This is the same method used in the US Constitution, in 1789. The US Dollar’s value was to be fixed to gold. The Americans actually stuck with it for over 180 years, until 1971. This was no great innovation, of course. The US was founded on the same good monetary principles that the leading countries had adopted for the previous three thousand years — as I documented in my 2017 book, Gold: The Final Standard. At the time, there was no good reason to expect the American colonists to become Hard Money enthusiasts. The Colonists had been one of the world’s biggest paper-money abusers, with a series of paper money depreciations and hyperinflations going back to 1690, when Massachusetts Colony started printing paper money to pay soldiers. Britain banned paper money issuance among the Colonies in 1764. The Colonists (including Benjamin Franklin) chafed at the new

In most countries, including Japan and, I think, most of Europe, payroll taxes are specifically earmarked to pay for welfare-type benefits. This is true in the US as well, with payroll taxes specifically earmarked for Social Security, disability, and Medicare. The basic idea is that of an insurance program, or, in the case of public pensions (Social Security in the US), a retirement annuity. I think most Generation X-ers do not generally think of payroll taxes in this manner. They are just a tax like any other, with their supposed “earmark” characteristics nothing but archaic fiction. From the 1980s to the present, when asked by researchers, Gen-Xers have always said that they did not expect Social Security to exist when they retire. It would blow up before then, due to the greed and irresponsibility of the Boomers. Boomers would say that “I deserve my Social Security benefits because I paid into them all my life,” as if it was a private-sector annuity. Gen-Xer’s attitude was more like “you took money from me all my life and then blew everything up, leaving nothing for later generations.” This seems obvious today, but I can attest that this was also the common assumption back in the 1980s, just as the historical polls indicated back then. So, it might take a little effort for a Gen-Xer to get more in the mindset of Boomers and other prior generations, actually imagining payroll taxes to be part a sort of separate welfare system from the rest of the Federal Government — its original conception, even if it was always a little fictional. The idea is that all of the welfare-type programs, including public pensions but also healthcare, unemployment benefits, and other need-based support programs, are bunched into a separate “welfare” program, with this directly financed by

My 2019 book The Magic Formula is now available in free .pdf form. Read The Magic Formula I wrote this as a one-volume introduction to the “supply side” school of economic thought, since 1970. I think that not even some core “supply siders” (such as Steve Moore or Dan Mitchell) have a full appreciation of how powerful these tools are, as I show in my many historical examples. Since US policy has been rather stagnant since the Reagan tax cut era ended in 1991, mostly this has been happening outside the US. Real life keeps coming up more amazing than the wildest fantasies. Most of this goes unnoticed by the economics intelligentsia. They are still wasting their time on nonsense. In The Magic Formula, I have a six-page description of how a turn from “austerity” policy toward a lower tax/lower spending strategy (combined with a stable euro, basically the Magic Formula) produced a dramatic turnaround in a number of European governments in 2014-18. I have not seen a good description anywhere else (and I was looking in 2019, when I was writing this). That alone would be a good book or PhD dissertation; or, better yet, a PhD dissertation that becomes a book. Plus, there are countless examples from farther back in history, that should be investigated. I turned up some very interesting whiffs of a successful Magic Formula policy during the reign of Anastasius I, emperor of Byzantium from 491 to 518. Plus, there is an interesting Free Enterprise history of the Muslim Empire, also known as the Saracens, which was explored in books such as The Discovery of Freedom, by Rose Wilder Lane (Laura Ingalls Wilder’s daughter), and also in The Mainspring of Human Progress, by Henry Grady Weaver. It gets three pages in my book. This also