Thursday, July 23, 2015

Analysis of Money No Mystery

Analysis of Money No Mystery
Thomas Allen

    The following is an analysis of Money No Mystery: Mastery by Monopoly by Arnold Leese [1938] (Hollywood, California: Sons of Liberty). Leese  (1878–1956) was a British fascist politician. What is proposed in his book is a fascist monetary system. He discusses some Jewish issues that are not addressed since they are beyond the scope and objective of this article. His words and my paraphrases or summaries of his words, I have italicized. My commentary is in roman letters. I have provided references to pages in his book and have enclosed them in parentheses.
    Mr. Leese comments on gold’s suitability for money. One property that makes gold suitable for money is its rarity (p. 3.). Rarity is an important characteristic for money if it is not too rare. What makes gold the most suitable metal for money is its flow-to-stock ratio. Annually, newly mined gold accounts for about 2 percent of the above ground stock of gold available for monetary use. Thus, newly mined gold does not have much effect on the value of gold.
    Mr. Leese remarks that irredeemable paper money had reached “a stage of general stability” (p. 3.). That may have been true during the late 1930s when he wrote. However, that stability was lost during World War II and the decades that followed.
    Like all fiat money advocates, Mr. Leese believes that governmental fiat gives money its value. Government can give otherwise worthless pieces of paper great value by declaring them legal tender and by that eliminate any need for gold backing (p. 3.). If governmental fiat can give money value, bimetallism would have worked. Gold and silver would have exchanged at the same value at the ratio decreed by the government. (Presumably, they would exchange at the same value even if various countries had radically different ratios.) If government fiat and legal-tender laws gave money its value, a $10 U.S. note would have had the same purchasing power as a $10 gold coin in the United States between 1862 and 1879. Instead U.S. notes traded at a discount to gold until they became redeemable on demand in gold.
    Mr. Leese claims, “No one inside this country [Great Britain] cared a scrap whether the legalised paper money was convertible or not into gold; he didn’t want gold; he wanted goods, and got them, through the scraps of paper legalised by the State as National Money” (p. 3.). That may be true. Only a miser wants money because it is money regardless of form. Most people want money so that they can trade it or invest it now or some time in the future. Convertibility into gold serves as a regulator of credit, paper money, and keeps it within proper bounds. If the government or banks are issuing too much paper money or other types of credit money, people will redeem the excess and halt the expansion. Gold keeps the monetary system honest and thwarts the expansionist programs of statists, which is why fascists and other statists hate it.
    Mr. Leese has a better understanding of the gold standard than most post-World-War-II writers, including proponents of the gold standard. He knew that the British pound was the value of 113 grains of gold (p. 4).
    Like most opponents of the gold standard, Mr. Leese declares, “Few people wanted to do this [exchange bank note for gold], because gold has limited functions in general utility; you can’t eat it, drink it, make clothes of it or even flirt with it; before you can make use of it, you have to exchange it for something you want” (p. 4). Thus, he presents one of the most absurd arguments that opponents of gold give. One can eat and wear gold. However, such an argument against gold is stupid and is intended to deceive. The same thing can be said about paper fiat money and even more so about its electronic equivalent. How does one eat, drink, and wear electrons, which make up the bulk of today’s money, flowing through some unknown computer at some unknown location?
    Mr. Leese makes an error common to most opponents and proponents of the gold standard. He asserts that if all paper money is not fully backed by gold, a true gold standard does not exist (p. 4.). The true gold standard does not require all paper money and other forms of market-generated credit money to be backed by gold. Bank credit money (bank notes and checkbook money) can also be backed by commercial money, real bills of exchange, which are themselves a form of market-generated credit money — the real bills doctrine.
    According to Mr. Leese, the international gold standard leads to people and countries attempting to corner gold to “become masters of the International Industrial situation.” Jews were the primary people who cornered gold. By cornering gold, Jews gain control of fixing the rate of interest (p. 4-5). Where the real bills doctrine operates, many financial transactions are with commercial money — not with gold. The propensity of consumers to buy fixes the discount rate of bills of exchange, which is not really interest — not the hoarders of gold. Hoarders of gold have much less power than their opponents give them. (A more detail discussion on hoarding gold is given in “Is Gold Too Easy to Manipulate?”)  As Jews control most of the paper money issued today through central bank operations, abandoning the gold standard for fiat paper money does not eliminate this issue. It does not assuage Leese’s problem of Jewish control of the monetary system. (Perhaps this is why the Protocols of Zion advocates abandoning the gold standard in favor of fiat paper money [v.i.].)
    Mr. Leese writes, “The Financier can, by using his control of Gold to expand or contract the volume of Money (currency or credit) in circulation, create boom or slump in Britain” (p. 5.). As post World-War-II history shows, the financier can more easily expand and contract the volume of paper money. He can expand the money supply far greater under today’s monetary system than he could under the gold standard. Thus, when the inevitable slump comes, it is more severe or last much longer than it would have under the gold standard.
    Like most opponents of the gold standard, Mr. Leese asserts that gold cannot “supply the industrial need for National Money” (p. 5). As I show in “There Is Enough Gold,” enough gold exists to accommodate world commerce several times over when accompanied by the proper credit system, the real bills doctrine. Enough gold was available in 2004 to accommodate 3.8 times the gross world product of 2007 without fractionalization of gold.
    Mr. Leese discusses Britain’s return to the gold standard following World War I (pp. 6-7).
    Mr. Leese writes, “OUR National Money must be divorced from its association with Gold” (p. 8). This part of his proposal has been achieved. In 1971 when President Nixon ended the gold exchange standard, Bretton Wood system, gold ceased any formal role in the world’s monetary systems.
    Mr. Leese states that countries (Great Britain) should pay for imports with domestic paper money that can only be exchanged for goods and services in the importing country (p. 8). To some degree, bills of exchange serve this purpose. The world is in the process of achieving the intent of his proposal by abandoning the U.S. dollar standard that has been in place since World War II. However, his proposal seems to require country A to buy from country B the value of products that it sells to country B. Such an arrangement would greatly hamper foreign trade.
    Mr. Leese recognizes the need to control the amount of money issued (p. 8). He does not offer any mechanism for doing this other than trusting politicians and bureaucrats. Thus, politicians and bureaucrats would have to act contrary to their nature by not seeking to increase their prestige, power, and wealth.
    Mr. Leese discusses how the practices of lending for interest came to Great Britain and the adverse effects of interest (pp. 9-12). Under fascism, interest on foreign loans belong to the people of the country as a whole and not to the individuals who lend the money abroad (p. 11). By “people as a whole” he probably means the government — at least that is what most statists mean. However, the government is not the people as a whole. It has never been and never will be. It is the small group of people controlling it. If the people as a whole are to receive the interest paid on foreign loans, some mechanism needs to be in place to divide that interest among the individuals of the country without the government getting part of it.
    Mr. Leese opposes the Social Credit scheme (p. 12). I discuss the flaws of Social “Credits in Analysis of Richard Cook’s Monetary Reforms.”
    Mr. Leese presents the monetary reforms of the Imperial Fascist League (pp. 12-15). A “Department of Issue is established to control absolutely the issue of currency and credit” (p. 13). Its objectives are:
    (1) Gradually inflate money and credit until the price level of commodities are raised to the level reached at the end of World War I (p. 13).
    (2) After achieving item 1 and in accordance with item 3, stabilize the purchasing power of money so that it becomes as fixed as the yard (meter), pint (liter), and pound (gram) and no longer varies; expand and contract the money supply to maintain a stable level of a general-price index (p. 13).
    (3) Adjust currency and credit until production is sufficient to satisfy the needs of the country and its exportation overseas (p. 13).
    (4) Retire gradually all external and internal interest-bearing government securities with non-interest bearing currency (pp. 13-14),
i.e., with non-interest bearing government notes or central bank notes that function like government notes.
    (5) Adjust gradually “to the new values by limiting currency inflation, in the early stages, to State disbursements” (p. 14),
i.e., the government gets the new money first before it loses value.
    (6) Distribute equitably credit inflation to agriculture and industry (p. 14).
    (7) Balance imports and exports by tariffs, embargoes, and trade packs that enforce equality in exchange value (p. 14).
The trade issue is discussed above.
    Mr. Leese does not propose governmental ownership of banking. However, banks are stripped of their ability to create money via lending. That is, he advocates 100‒percent reserve banking. The government introduces new money by buying government securities and cancelling them and with low-interest loans. Only the government can lend money for mortgages, which are lent through deposit banks. The government fixes all bank interest rates (pp. 14-15).
    His proposal has so many flaws, one knows hardly where to begin. His system depends on the wisdom and integrity of politicians and bureaucrats. If that were not enough, his proposal also depends on them be omniscient. Governments have attempted items 1, 2, and 3. So far they have all failed.
    Moreover, all price indexes are flawed. They always over count some items and under count others. As people’s tastes constantly change, price indexes need to be revised often to account for changing tastes. Also, changes in technology affect quality and cost as well as offering new items not in the index. These changes need to be considered. An ever-changing price index makes comparing the cost of living over an extended time questionable. Furthermore, governmentally generated price indexes are subjected to political consideration. Politicians like to conceal inflation, so they adjust price indexes to hide the real cost of living.
    Most countries can achieve item 4, if so desired, by having their central banks buy all their securities. To keep such action from resulting in massive inflation,  if not hyperinflation, would require large-scale restraint of the monetary and banking system.
    When governments fix interest rates, they drive high-risk borrowers to the black market (loan sharks) for loans. To propose involving the government in the mortgage and lending markets is fuel for corruption and disaster. Governmental intervention in the mortgage and lending markets was a major contributor to the crash of 2008. When governments become involved in economic activities, politics usually trump economics.
    A great irony of Mr. Leese’s fascist proposal of replacing the gold standard with fiat paper money is that the Jewish Protocols of Zion has the same proposal. The Jewish proposal is set out in Protocol 20:
        The present issue of money in general does not correspond with the requirements per head, and cannot therefore satisfy all the needs of the workers. The issue of money ought to correspond with the growth of population and thereby children also must absolutely be reckoned as consumers of currency from the day of their birth. The revision of issue is a material question for the whole world.
        You are aware that the gold standard has been the ruin of the States which adopted it, for it has not been able to satisfy the demands for money, the more so that we [Jews] have removed gold from circulation as far as possible.
        With us [Jews] the standard that must be introduced is the cost of working-man power, whether it be reckoned in paper or in wood. We shall make the issue of money in accordance with the normal requirements of each subject, adding to the quantity with every birth and subtracting with every death.[1]
The two proposals merely disagree in the criteria to use in deciding how much money the government needs to inject into the economy. Was Mr. Leese an agent of the Jews?
    Mr. Leese’s proposal fails to achieve his purported goal. It does not make the monetary system or economy better — at least not in the long run. However, it greatly increases the power of the government, i.e., those who actually control the government, over the economy and the people. As such control is a goal of fascism, Mr. Leese’s proposal does successfully achieve that fascist goal.

1. Protocol of the Learned Elders of Zion, ed. Sergyel Nilus, trans. Victor E. Marsden (1905, 1922), p. 16.

Copyright © 2015 by Thomas Coley Allen.

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