 As someone who holds physical gold (and silver), i am sorry to say that i must take issue with some of Mr. Barton's comments. To begin with, his assertion that all fiat currencies will collapse and that they will do so at the same time is a statement of contrafactual definiteness that cannot be based on mathematics and there is no historical precedent to give his assumption even a modicum of validity. There are afterall nations such as Singapore, Finland and Saudi Arabia that have managed their public finances very well and there is absolutely no reason to believe that a collapse of--let us say--the Euro, would inexorably lead to the loss of confidence in their currencies.
The second problem with Mr. Barton's thought process has to do with just how impractical a pure gold standard would be. For example, if you wanted to buy a clove of garlic today, you would need to fork over about 1/8000 of an ounce of gold. Assuming you could even find that microscopic chip in your pocket, how is the clerk to know that what you are tendering is actually gold (such a tiny amount cannot be assayed) and should he have to make change, how would he be able to do so? And in the system he champions, let us not forget that clove of garlic would actually cost a great deal less gold.
Yet another problem with Mr. Barton's reasoning has to do with his unfounded assumption that gold maintains its purchasing power. That is a myth, pure and simple. The ounce of gold bought in 1980 certainly did not buy you nearly as much in 2000. Now should you object to this fact by claiming that it is only true because we have not been on a gold standard of any variety since 1971, then consider the following. Were a major find of gold to be discovered, its purchasing power would be diminished and conversely, were there to be very little new gold found, its purchasing power would increase. To keep things more or less stable, it has been estimated that an additional 2-3% more gold must be mined each year. That is unlikely to happen in perpetuity.
A further problem not at all addressed by Mr. Barton has to do with what happens to all the debt. It will not go away just because we are now using gold as our money. In the blink of an eye, the vast majority of humanity would be reduced to begging and in less than a day, Fort Knox, West Point and the N.Y. Fed would be emptied; the gold all going to the major banks and foreign entities holding American paper, for you can be sure they will not want to hold paper at that juncture.
None of this should be construed in such a way as to come to the conclusion that i am championing fiat currencies, for i am not. i believe that both gold and silver have a place in whereever it is we go from here. As for where that should be, i think that for starters we need to abolish the central bank model in that it has shown itself to be a failure. Not only does it cause great harm by artifically setting interest rates, it also causes needless damage in that it forces governments to pay interest for every new dollar, yen or sheckle created when in fact, governments have and could again issue their own currency as required without cost. As things now stand, the money in our pockets is in reality little more than a bond that pays no interest and has its purchasing power being continually eroded by the never ending creation of yet more debt instruments.
Secondly, we need to get rid of fractional reserve banking in that it only compounds the problems created by central banks. Let banks go back to fulfill the purpose for which they were initially created.
As well, i believe that we desperately need to restructure our existing debt and that a good part of that will require investors to take a proverbial haircut. And why shouldn't they? As we all know, not all investments work out well and if someone is stupid enough to lend money to someone who has not balanced their budget in decades, they deserve to lose on their investment. As things now are, governments have no choice but to keep trying to squeeze more money out of its citizens with increased taxes, new taxes and user fees just to make good on their interest payments. That is a situation that has never ended well and will not this time either.
And lastly, let us return to currencies that are at least in part backed by something more than the promise of the issuer, for as we have all seen far too clearly, these people are not to be trusted. Commented 4264 days ago |
