| Subject: | [socialcredit] Notes on a Return to the Gold Standard | | Date: | Wednesday, May 16, 2007 08:04:48 (-0700) | | From: | william_b_ryan <william_b_ryan @.....com>
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This is Richard Cook's latest Internet posting. As
before, I have certain reservations, particularly with
his association with Stephen Zarlenga's organization,
and its draft monetary reform legislation. And his
adherence apparently to the State Theory of Money.
One question for Richard: You mention a recent
article of yours entitled, “Monetary Reform and How A
Nation’s Monetary System Should Work.”
Where might that article be found?
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Notes on a Return to the Gold Standard
by Richard C. Cook
May 15, 2007
Within the monetary reform movement there is a raging
controversy over whether we should return to the gold
standard or whether an effective program of reform
could be accomplished through other means.
While the author of this article does not support a
return to the gold standard, he is sympathetic to
those who want to do just that. When the U.S. went off
the gold peg in 1971, it opened the door to the modern
era of runaway inflation, dollar hegemony, and the
unlimited creation of financial bubbles. Removal of
gold altogether from the monetary system is certainly
one of the key events which has exposed us to the
danger of a major financial crash and worldwide
depression.
But throughout history, a gold standard has generally
acted as an artificial constriction on the ability of
a currency to expand sufficiently to support economic
growth. By making currency scarce, the gold standard
facilitated the bankers’ control of the economy. It
was the bankers who got the governments of the world
to go onto the gold standard after 1870 by undermining
the utilization of silver. This allowed the bankers to
control the world’s monetary supply to the detriment
of economic democracy until the 1930s, when gold
became only a denominator of international trade, not
a backing of domestic currencies.
One of the most destructive periods of U.S. economic
history took place during the currency contractions,
monetary deflations, and financial ruination of
farmers and workers during the late 1800s, when the
bankers ruled through gold. It was what led to the
founding of the Greenback and Progressive parties and
to William Jennings Bryan’s famous speech at the 1900
Democratic national convention where he declared that
we should not “crucify mankind on a cross of gold.”
The situation was relieved by the discovery of gold in
South Africa and the Yukon and by improved methods for
the extraction of gold from ore. But these
circumstances also showed that a gold standard favored
those nations which controlled gold. A gold standard
leads to hoarding, market manipulations, and
ultimately warfare over its possession and control.
Also, gold may or may not prevent inflation, because
there are many things bankers can do to inflate the
currency if they wish to. This happened with the
inflation during and after World War I. This was a
financial crime by which the bankers deliberately
destroyed the value of the remaining paper greenbacks
and silver certificates from post-Civil War days.
During the 1920s and 30s, the U.S., acquired much of
the world’s gold through having lent bank-generated
credit to the European allies so they could pay for
having fought World War I. This policy impoverished
much of Europe, including Germany, which had to pay
war reparations, and contributed to the conditions
leading to World War II.
It was the gold standard that led to the bankers
wrecking the U.S. economy in 1932 by shipping Treasury
gold as a bail-out to England, at the same time the
U.S. was trying to recover from the crash of 1929. The
1932 gold and currency contraction was the real cause
of the Great Depression. President Franklin Delano
Roosevelt removed this danger by eliminating the
domestic gold standard in 1933.
But even when paper currency was supposedly
convertible to gold, or even gold and silver, the
metallic standard always was a fiction. There never
was and never could be enough for banks to hand over
the requisite quantity to the “bearer on demand” if
more than a fraction of the currency in circulation
was presented for redemption at the same time.
In fact, during the state banking era prior to the
Civil War, banks would destroy their rivals by showing
up on their doorstep with quantities of the paper
notes of the bank under attack and asking with a smirk
for metallic reimbursement. The same thing happened
during runs on the banks, resulting in frequent
financial panics and bankruptcies.
Actually, those who favor a return to the gold
standard tend to confuse the shaky redemption policy
with the days when a miner or broker could walk into a
U.S. Mint and have the government stamp his gold or
silver into coins free of charge. Those really were
the “good old days,” but that time is gone forever.
Should we return to the time of a banker-controlled
gold standard? Probably not. What should really
control the monetary supply is the sovereign power of
representative government which must be equipped with
the knowledge and authority to balance purchasing
power with economic production.
This could be done by a National Dividend system
combined with reduced taxation and direct government
spending of money into the economy. The system would
be overseen by a Monetary Control Board as advocated
by the American Monetary Institute in its draft
monetary reform legislation. The author describes such
a system in his recent article, “Monetary Reform and
How A Nation’s Monetary System Should Work.”
At the same time, lending for speculation should be
outlawed, as should fractional reserve banking. There
would then be no reason why money could not be paper,
coinage, or electronic ledger entries. The monetary
supply could expand or contract according to the real
needs of the producing economy, not a more or less
accidental quantity of precious metal.
For this to work, control of money must be removed
entirely from the banks and restored to the people,
acting through Congress as the U.S. Constitution
requires. And under such a system where the money
supply served real human needs instead of bank
profiteering, promise of gold redemption would be
unnecessary.
Having said all this, the author certainly has no
objection to the buying and selling of gold as a
commodity. Under certain conditions it might serve as
a store of value and a hedge against inflation. But
you can’t wear it, eat it, or live in it. What gives
value to an economy is its ability to produce goods
and services. That ability derives from the skills,
education, and spirit of a nation’s population. In the
end, money really derives its value from the character
of the people and the honesty of government. That is
why we should not even try to go back to an era where
the monetary system failed in large part because of
the gold standard.
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Richard C. Cook is the author of Challenger Revealed:
An Insider’s Account of How the Reagan Administration
Caused the Greatest Tragedy of the Space Age. A
retired federal analyst, his career included stints
with the U.S. Civil Service Commission, the Food and
Drug Administration, the Carter White House, and NASA,
followed by twenty-one years with the U.S. Treasury
Department. He is now a Washington, D.C.-based writer
and consultant and will be speaking at the American
Monetary Institute annual conference in Chicago, IL,
in September 2007. His website is at
www.richardccook.com .
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Notes on a Return 
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