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Lost art of
stained glass
The
town of Chartres, France, boasts one of the finest and earliest example of
gothic cathedrals. Its stained glass windows are the object of pilgrimage
from the all over the world. The admiring pilgrims look at them in awe as
they discover how their glow changes while the Sun journeys across the sky.
Words cannot do justice to the deep burning blue, burgundy, purple among the
many other colors. They must be seen to be believed.
Nor
can they be duplicated, try as one may, with today's technology. There was something
the medieval stained glass window makers have known that we don't. Their art
is a lost art. For generations after generations its formula was handed down
from fathers to sons. But the last member of the dynasty took the secret of
blending these exquisite colors with him to the grave when he died. There was
many an attempt to rediscover the lost secret - to no avail. No matter how
much higher a level chemistry, physics, and other supporting sciences have
reached today, the stained glass windows of Chartres are beyond comparison
with the proudest achievements of modern science - and art.
Will the gold
standard go the way of stained glass?
I want
to sound the alarm. The art of the gold standard may go the way of the art of
making stained glass windows in Chartres. Calling the gold standard an art is
no exaggeration. It achieves as high a degree of harmony in the affairs of
man as any other form of art, in addition to being a pillar of economic
science. Now this art and science has become and endangered species. When my
generation leaves the stage, the gold standard will be expunged from living
memory. Young people will only know about the Golden Age of the gold standard
what government-controlled schools will let them. Of course, governments like
to pose as champions of preserving our intellectual heritage. That may be
true, except when it comes to the gold standard which they treat as you would
alchemy or astrology. Governments want to be thanked for delivering us from
this 'barbarous relic'. They suggest that we should look at the gold standard
with the same sense of shame as you would on vivisepulture or ius primae
noctis. The gold standard sprang from superstition, they say. We don't
want to be reminded of the fact that our ancestors fell under its spell.
Their example could be contagious. We must cherish our 'progressive' paper
money system that has freed us from the slavery of superstition.
Yet it
is this way of looking at the gold standard that is backward, not the gold
standard. It is the paper standard that is based on ignorance, not the gold
standard. It is the regime of irredeemable currency that has enslaved savers
and producers, not the gold standard. It was the sabotaging of the gold
standard that caused the Great Depression, not the gold standard. There is no
reason to be ashamed of our monetary heritage and to disown its greatest
protagonists and practitioners: the schoolmen, Sir Isaac Newton, Adam Smith,
among others. We should go out and pick up the pieces before they fall into
oblivion.
Gold War
As
Ferdinand Lips' book Gold Wars so admirably proves, governments have
been waging war on gold for centuries, if not for millennia. Recently they
have claimed victory and appear to have silenced all critics of their paper
money system based on irredeemable promises, in spite of overwhelming
historical evidence showing that it is subject to the 'sudden death
syndrome'. Skirmishes that may still go on are just mopping-up operations in
the Gold War, as academia and media in fealty to the government suggest. The
important thing, according to these sycophants, is that there is no
alternative available to money created on the strength of government
authority, following scientific principles - the source of great blessings to
society. The gold standard has been thoroughly discredited by events in the
twentieth century, they say, in particular by the horrible unemployment for
which it alone was responsible.
The
truth, however, is that the Gold War is still raging. One indication is the
governments' campaign against the gold price. GATA, the organizer of this
Conference, can take credit for fighting this clandestine operation, and for
demanding transparency and full disclosure of government involvement in the
gold market. This is the first front in the gold war. But there is a second
front, too, albeit not so widely recognized. Governments and their central
banks are engaged in subverting the history and theory of gold as money par
excellence. It is a propaganda war. Central banks spend unlimited amounts
of public money to subsidize so-called research aimed at discrediting the
gold standard, and to suppress evidence that the regime of irredeemable
currency is subject to the 'sudden death syndrome'. Their methodology is
borrowed from Hitler: if lies are repeated often enough, and those courageous
enough to expose them are taken care of through bribe and blackmail or worse,
then people will eventually accept lies as truth.
Self-mutilation
by another name
The
war must be won on both fronts, or it cannot be won. Governments and their
central banks have an exceedingly poor case. Nothing shows this more
convincingly than the fact that the American establishment could never muster
sufficient moral courage to propose a constitutional amendment, dropping the
requirement for a metallic monetary standard which is still on the books. It
would rather live with the odium of running an unconstitutional monetary
regime, with a most miserable record of falling purchasing power for the
currency, and roller-coaster rides for bond values, ruining savers and
producers.
Irredeemable
currency is a scheme to wage trade wars and to pauperize people on both sides
of the border. Following Milton Friedman, currency devaluation is openly
advocated as a legitimate policy to bring trade accounts into balance. The
goal is to pauperize people on the other side of the border through
gaining illicit trade advantages in making the national currency cheaper.
This is to forget that our trading partners could retaliate in kind. They
could make their currencies cheaper still. Pauperization of people on this
side of the border is the consequence.
The
latest charade is the devaluation of the dollar against the Chinese yuan. It
can be safely predicted that this, like all previous devaluations of the
dollar, will make the position of the American exporters weaker, not
stronger, and it will cause more well-paid American manufacturing jobs to be
exported, not less. The American trade deficit is growing by leaps and
bounds. Why? Because of the insane 'weak dollar' policy. The devaluation of
the dollar is a huge bonanza for the competitors of American business. They
will be able to buy more imported goods per unit of exports than before. By
contrast, Americans will be able to buy less. The devaluation of the dollar makes
the terms of trade worsen for America, and improve them for the foreign
competitors. Devaluation of the national currency is self-mutilation by
another name. Champions don't have their limbs amputated before the race.
Governments shouldn't either.
Mainstream
economics is guilty of preaching a false theory which has corroded and will
ultimately destroy America's economic and financial power. It is the false
theory that the devaluation of the currency helps the country export more and
import less. This theory ignores the fact that production for exports also
uses imported ingredients. As these ingredients will cost more in the future,
the devaluing country has shot itself in the foot, and will not be as
competitive in the world market as before. The flip-side of the coin is that
producers in the country against which the national currency has been
devalued (in this case, China) are now able to buy the imported ingredients
of their exports more cheaply in the world market, and their competitiveness
has increased accordingly. They could very well use this advantage to
increase their market share, to the detriment of the American exporter. The
devaluation 'magic' may work in the very short run, until the stockpiles of
imported ingredients, which were bought at the pre-devaluation price, run
out. Thereafter, they will cost more.
The
theory that has formed the basis for the weak dollar policy of the US
government for the past 35 years is thoroughly unsound. It is self-defeating.
As the record shows, it made the American trade deficit grow rather than
contract. It has exposed America to great dangers.
The
solution to the problem of persistent trade deficits is not to be found in
the manipulation of the value of the national currency downwards. Quite to
the contrary, it is to be found in the stabilization of the foreign
exchanges through an international gold standard. This presents an
educational challenge to GATA: it should lead the fight against official
disinformation about gold, just as it has led the fight against official
distortion of the value of gold.
Revisionist
Theory and History of Money
I have
started a new series of articles under the title "The Revisionist Theory
and Histroy of Money". In the first of the series entitled Real Bills
and Employment I show that the Great Depression and world-wide
unemployment in its wake was caused by obtuse government policies in stamping
out the international bill market, not by the gold standard as alleged by
mainstream economics. Here is the argument.
1909
was a milestone in the history of money. That year, in preparation for the
coming war, the governments of France and Germany have decided to accumulate
gold in their coffers. To this end they stopped paying their civil servants
in gold coins. This measure necessitated legislation to make the notes of the
Bank of France and the Reichsbank of Germany legal tender. Most people did
not even notice the subtle change. Gold coins stayed in circulation for
another five years. It was not the disappearance of gold coins from
circulation that marked the beginning of the destruction of the world's
monetary and payments system. Rather, it was the French and German
governments' decision to sabotage the clearing system of the international
gold standard in making the notes of their central banks legal tender.
Gold: the
philosopher's stone
The
secret of job-creation is not government spending. It is gold, the
philosopher's stone. More precisely, it is a gold standard cum real
bills. It is paying workers in gold coin, as before 1909. If the government
pays its civil servants in gold, business has no choice but to pay workers in
gold, too. This measure also puts a break on expanding the civil service too
fast, and keeps the government from using the civil service for the purpose
of controlling the lives of citizens.
At the
end of World War I the victorious governments did not allow the bill market
to resume its pre-war function of serving as the clearing house for the
international gold standard. Trade was made bilateral. Not only did this put
the gold standard in jeopardy but, less obviously, it destroyed the wage fund
out of which workers in the consumer goods sector could be paid well in
advance of the sale of export goods to the final gold-paying consumer. This
wage fund had been financed through real bills, not through gold. It is
futile to expect that gold should be available to pay wages in the consumer
goods sector, in some cases as much as three months in advance of the sale of
goods, in the absence of a wage fund. Yet this is exactly what the
governments did when they put foreign trade on a 'cash-and-carry' basis. They
inadvertently abolished the wage fund when they wrecked the bill market, the
clearing system of the gold standard. They expected the gold standard to
continue smooth operation thereafter. But it could not operate without a
proper clearing system. At one point the gold standard would seize up.
Cause of
unemployment: denying self-liquidating credit
The
causal relationship between the expulsion of real bills and massive
unemployment world-wide has escaped the attention of virtually all
economists. They attributed it to the failure of the gold standard, due to
its alleged inner contradictions. They called the gold standard
'contractionist'. This represented a colossal misunderstanding of Adam
Smith's Real Bills Doctrine. After the wage fund was destroyed, unemployment
could only be alleviated if the government assumed responsibility for paying
wages. This it did by creating the so-called 'welfare state' that paid workers
for not working and farmers for not farming. Had the governments allowed real
bill circulation to return, there would have been no unemployment. Everyone
eager to earn wages could have found employment in the consumer goods sector.
There would have been no unsaleable surpluses either. It's as simple as that:
under the gold standard consumption creates jobs, and jobs create the income
which will buy the goods (Say's Law) - provided the government does not
sabotage the clearing system, the bill market.
There
were political consequences as well of the government's sabotaging the
clearing system of the gold standard. The popularity of totalitarianism, Nazi
Socialism and Bolshevik Communism, were due in large part to the
unattractiveness of unemployment-ridden democracies. The fact is that people
who sought to escape totalitarianism by voting with their feet were turned
back at the border, including shiploads of Jewish refugees from nazified
Europe who were not allowed to step on shore when their boats docked in America.
There was no place for them underneath the Sun, because there were no jobs
waiting for them. With the bath-water of real bills, governments have thrown
out the baby of employment opportunities.
Democratic
governments were also the culprit for the longevity of totalitarianism.
Having destroyed the wage fund by barring international real bills
circulation, the borders had to be sealed barring immigration. Recall that
under the international gold standard people able and willing to work were
always welcome. After the wage fund had been destroyed, the same people
became unwanted. They were left to the tender mercies of totalitarian regimes
where there was plenty of work for them - in forced labor camps.
Had
real bills been allowed to make a come-back, pre-war conditions of employment
and prosperity would have been quickly restored after the cessation of
hostilities. More consumption would have created more employment
opportunities, provided that the clearing system of the gold standard, the
international bills market, had not been sabotaged by the government. The
gates of immigration could have been kept wide open. The drab, neurotic, and
impecunious way of life under the totalitarian regimes would have triggered a
massive exodus of workers, similar to the one from East to West Germany prior
to the erection of the Berlin Wall. Totalitarian regimes would have been
denied manpower. As a result, they would have collapsed much sooner.
Unemployment
is still a problem in the world. It wouldn't be if the gold standard were
resurrected together with its clearing system, the market in real bills. It
will take an enormous educational effort to convince the electorate that
unemployment can be stamped out only if we have an elastic wage fund out of
which workers in the consumer goods sector can be paid. Such a wage fund
could never be financed out of savings. It must be financed through
self-liquidating credit: through the spontaneous circulation of real bills.
Gold Standard
University Live
I have
decided to make my Gold Standard University that has existed on the Internet
since 2002 'live'. The inaugural session will take place in February, 2007. I
urge GATA to engage governments on the second front of the Gold War as well.
What better way to fire to opening salvo than endorsing Gold Standard
University Live?
We owe
it to the younger generation to tell them the truth about the gold standard
and its clearing system, and how they fell victim to government sabotage.
They should know that the gold standard is not only part of their heritage,
but of their birthright as well. It is inseparable from the right of the
pursuit of happiness of which the Declaration of Independence speaks. The
international gold standard is the only monetary system that can guarantee
work for everybody eager to earn wages, under the system of division of labor
and fair trade practices world-wide - provided that its clearing system, the
market in real bills, is not sabotaged by the governments.
References
Antal
E. Fekete, A Revisionist Theory and History of Money, 'Gold Rush 21'
Conference Proceedings, August, 2005, Dawson City, Yukon, Canada, p 101-102;
Gold Anti-Trust Action Committee, Inc., 7 Villa Louisa Road, Manchester,
Connecticut 06043-7541, U.S.A.
Antal
E. Fekete, Real Bills and Employment, ibid., p 103-108.
Gold
Standard University Live, GOTO: GSUL@t-online.hu and ask for:
"Announcement".
Antal
E. Fekete
San Francisco School
of Economics
aefekete@hotmail.com
Read
all the other articles written by Antal E. Fekete
DISCLAIMER AND CONFLICTS
THE PUBLICATION OF THIS LETTER IS FOR YOUR INFORMATION AND AMUSEMENT ONLY.
THE AUTHOR IS NOT SOLICITING ANY ACTION BASED UPON IT, NOR IS HE SUGGESTING
THAT IT REPRESENTS, UNDER ANY CIRCUMSTANCES, A RECOMMENDATION TO BUY OR SELL
ANY SECURITY. THE CONTENT OF THIS LETTER IS DERIVED FROM INFORMATION AND
SOURCES BELIEVED TO BE RELIABLE, BUT THE AUTHOR MAKES NO REPRESENTATION THAT
IT IS COMPLETE OR ERROR-FREE, AND IT SHOULD NOT BE RELIED UPON AS SUCH. IT IS
TO BE TAKEN AS THE AUTHORS OPINION AS SHAPED BY HIS EXPERIENCE, RATHER THAN A
STATEMENT OF FACTS. THE AUTHOR MAY HAVE INVESTMENT POSITIONS, LONG OR SHORT,
IN ANY SECURITIES MENTIONED, WHICH MAY BE CHANGED AT ANY TIME FOR ANY REASON.
Copyright © 2002-2008 by Antal E. Fekete - All rights reserved
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