Thursday, March 30, 2017

Gold Miners and the Gold Standard

Gold Miners and the Gold Standard
Thomas Allen

    One of the many arguments used against the gold standard is that gold is at the mercy and whim of a single industry: the gold mining industry. The gold mining industry decides how much gold is available. This argument that gold miners decide the amount of gold available for money fails on at least four accounts.
    First, current mining of gold provides only a small fraction of gold available for monetary use. Nearly all the gold ever mined is available. Gold miners typically provide about 2500 tons of gold per year to a world stock of around 155,000 tons.
    Second, when the real bills doctrine and decentralized banking accompany the gold standard, the quantity of paper money (credit money) available does not correspond to the quantity of gold available. Bank notes and checkable deposits can expand and contract to meet the needs of commerce independently of the quantity of gold. Gold mining does not have a monopoly on gold-based money.
    Third, gold’s monetary value depends on the integrity of the monetary unit and its issuer and not just the quantity of money. Having a definite fixed monetary unit is more important than the actions of gold miners.
    Fourth, the profit motive guides gold miners. They have an incentive to provide their customers as much gold as they demand in a cost-effective way. Profits of gold mining increases as output increases and production cost decreases. The desire for profit drives gold miners and not the monetary needs of the country or the desire of gold miners to manipulate the money supply.
    Opponents of the gold standard claim that the markets do not regulate the gold supply. Gold miners usually mine gold as fast as they can. Smart miners do not necessarily mine all that they can as fast as they can. They mine at a rate that maximizes their return. Furthermore, the consumer is the final determinant in the quantity of gold mined by his consumption of gold and gold products.
    Under the gold standard, the markets regulated the quantity of gold coins and gold bullion used as money. If the markets demand more coins, jewelry, flatware, and other items of gold are converted to coins. Gold dealers and others melt gold products into bullion bars and present this gold to the mint for coinage. If the markets decide that too much gold is being used for money, people melt the excess gold coins and use the gold for other purposes, such as gold teeth and jewelry.
    One feature of the gold standard is that it is self-regulating and automatically adjusts to meet the demand for metallic money. Some opponents of the gold standard are convinced that gold miners regulate the supply of gold by how much gold they mine. Gold miners do add to the supply of gold by the amount that they mine. However, unless they are coining their gold, they are not adding to the monetary stock. (The exception is the Rothbard school, which claims that all gold regardless of form — the weight of the metal and not its form makes the money — is part of the monetary stock.) The markets decide how much gold is being used as money. They decide that by the quantity of gold brought to the mint for coinage and by how many coins are melted for other uses. If the value of gold in jewelry, for example, begins to rise in relationship to the value of gold in coins, people will melt the coins and convert them to the more valuable jewelry until the value of the two are brought back in line. If the value of gold in coins begins to rise in relationship to gold in jewelry, people will convert the gold in jewelry into coins until the value of the two are brought back in line. Gold miners may influence the quantity of gold available, but they do not decide how much of the available gold is used as money.       
    Some opponents seem to believe that the gold standard operates like the current fiat-paper-monetary standard where bankers lend new money into circulation. They fear gold miners lending new gold money into circulation. Gold miners could do this, but it is highly unlikely. They would only be lending about 2 percent of the world gold stock. The other 98 percent is available for monetary use without borrowing or lending. Are people really going to borrow that 2 percent?
    Gold miners do not lend newly mined gold into circulation. They spend newly mined gold into circulation by paying their employees, stockholders, bondholders, creditors, and suppliers and also by paying their taxes and utilities.
    Contrary to the claims of opponents of the gold standard, gold miners do not control the quantity of gold available for monetary use. They merely add a small percent to the global gold supply each year. The markets decide how much gold is to be used as money in the form of  gold coins and monetary bullion.

Copyright © 2013 by Thomas Coley Allen.

Monday, March 20, 2017

The Yankee

The Yankee
Thomas Allen

    Who is the Yankee? In his book The Yankee Problem: An American Dilemma (Columbia, South Carolina: Shotwell Publishing LLC, 2016), Dr. Clyde Wilson gives an excellent description of the Yankee. (Pages numbers in parentheses reference Wilson’s book.)
    The Yankee is a descendant of New England Puritans and their latter allies, the radicals and revolutionaries, many of whom were Jews, who fled Europe after their failed Revolution of 1848. He is easily recognized by his “arrogance, hypocrisy, greed, lack of congeniality, and penchant for ordering other people around” (p. 1). Also, he is “self-righteous, ruthless, and self-aggrandizing” (p. 2). The guiding principle of the Yankee is that he is compelled to meddle in everyone else's business, both home and abroad. He cannot just leave people alone. Moreover, he has an uncontrollable desideratum to remake the world in his own image.
    Furthermore, the Yankee is “contemptuous of good manners, boastful, ever ready to cast away traditions for the newest idea, and see making money as the chief object of life. Equality and majority rule for them should determine everything — in society and culture as well as before the law” (p. 20). (An example of the “‘out with the old’” and “‘in with the new’” is the condemnation and overt destruction of traditional man-woman marriages while promoting same-sex “marriage.” Heterosexuals are now abnormal while homosexuals and transgenders are now normal.) He is never satisfied unless he is making changes.
    The Yankee reveals himself as “the greedy rent-seekers through government and the moralistic reformers. . .” (p. 24). Greedy-rent-seeking-through-government results in protective tariff and import quotas, subsidies for agriculture and businesses, centralized banking, and internal improvements (subsidies for building roads, canals, harbors, and airports and for urban renewal) — in short, the Hamiltonian government-business partnership made permanently by Lincoln. Moralistic reform results in abolitionism, prohibition of alcohol and tobacco, the war on drugs, the war on poverty, the civil rights movement, homosexual and transgender rights, the drive to make every religion acceptable except Christianity, which must be eradicated, etc. Furthermore, the Yankee is the “builder of the all-powerful ‘multicultural’ therapeutic state (with himself giving the orders and collecting the rewards) which is the perfection of history. . .” (pp 8-9).
    As Wilson notes, “Yankees have no civilization — only money and ideology. Without us [other Americans especially Southerners] to abuse and claim to feel superior to, they would not exist” (p. 15). Thus, Yankees are the real supremacists. Nevertheless, hypocrites that they are, they are always condemning supremacists — white and racial supremacists, male and sexual supremacists, civilization and cultural supremacists, the wealthy, etc. Moreover, continues Wilson, “The identification of God with America and the United States with infallible righteousness is Yankee stuff through and through. It is exactly the type of ‘religion’ that was used to deify Lincoln and justify the conquest of the South in 1861-1865” (p. 15). Such underlaid Bush in his war with Iraq and Afghanistan and Obama’s continuation and expansions of wars in the Middle East and Africa.
    The Yankee places great value on education and was a pioneer in public schools, government churches. However, the education that he promotes is superficial. He wants people to be educated enough to read and be swayed by a demagogue, but not learned enough to analyze what he has read. To the Yankee, the purpose of education is to train obedient servants and workers; it is not to enlighten and teach people to think and be creative.
    In the nineteenth century, Yankees were the abolitionists, prohibitionists, and promoters of protective tariffs, centralize banking, and internal improvements. John Quincy Adams, Henry David Thoreau, Ralph Waldo Emerson, Horace Greeley, William Cullen Bryant, Thaddeus Stevens, John Brown, and Horace Mann are notable nineteenth-century examples. Today, notable examples are Hillary Clinton, John Kerry, and both George Bush the elder and the younger. Other examples are Teddy Roosevelt, Timothy McVeigh, and John Dewey. On the religious side, Yankeeism appears in Charles G. Finney, Joseph Smith (founder of the Mormons), William Miller (founder of the Seventh Day Adventists), and Billy Sunday. Besides birthing Mormonism, Seventh Day Adventism, abolitionism, prohibition, Yankeeism has also birthed vegetarianism, feminism, progressive education, and all sorts of social experiments. (Abolitionism had almost nothing to do with the plight of Black slaves and a great deal to do with hatred of Southerners.) Over the last two centuries, the Yankee has seized control of the American educational system, American history, American literature, the media, and just about every other aspect of American life. In the United States today, the domain of the Yankee is easily recognized. It is the blue states — the northeast, the upper Midwest, and the Pacific coast.
    If one wishes to learn more about these peculiar people, Yankees, he should read Dr. Wilson’s The Yankee Problem.

Copyright © 2016 by Thomas Coley Allen.

Articles on Southern Issues.

Saturday, March 11, 2017

Land-Backed Currency

Land-Backed Currency
Thomas Allen

    Some people recognize the absurdity of the current monetary system based on the concept of backing bank notes and the electronic equivalent with promissory notes that promise to pay with bank notes that promise to pay nothing. They have been taught that gold is the worst sort of money — even worse than the current monetary system. So, some suggest backing the currency with land. Unfortunately for them, land makes low quality money.
    For any commodity, including land, to serve adequately as money, it needs to be portable (relatively high value per unit of weight), homogeneous or uniform, durable, divisible, recognizable, highly marketable (highly liquid, universally acceptable), and stable in value. Also, the commodity used for money should be fairly scarce, but not too scarce. Furthermore, it should have a high stock-to-flow ratio, that is, the quantity of the commodity readily available for use as money is high compared with the newly added supply.
    Portability. Land scores extremely low in portability. How does one transport a square kilometer of land from Iceland to New Zealand? Presumably, the land could be dug up and transported by ship. Then, how deep does one dig? Moreover, the cost of transporting the land probably would far exceed the value of the land.
    Homogeneity. Land scores extremely low in homogeneity. In valuing land, location is vitally important. Land in the City of London has much more value than an equal area of land in central Greenland.
    Durability. Land scores high in durability, especially if its use is ignored.
    Divisibility. Land scores high in divisibility. It can be subdivided to where a magnifying glass is needed to see it.
    Recognizability. Land also scores high in recognizability. Everyone can recognize land.
    Marketability. Land scores low in marketability. It cannot be transferred in seconds from one owner to another without a significant, often a great, loss in value. Moreover, days may be needed to transfer land ownership legally. Thus, land is not highly liquid. Also, land is not universally acceptable as payment for goods, services, and debt.
    Stability. Land scores low in stability of value. In 1991, the aggregate value of all the land in Japan was almost four times that of the United States. By 2005, land in Japan had lost half its value while land in the United States had more than tripled in value.
    Scarcity. Land scores extremely low in scarcity. Next to salt water, it is earth’s most abundant commodity. It is the most abundant commodity if the land beneath the oceans is counted.
    Stock to Flow: Land has an excellent stock-to-flow ratio. The amount of new land being formed is insignificant compared to existing land. Also, land being destroyed is insignificant.
    Land scores high in durability, divisibility, recognizability, and stock to flow. However, it scores low in portability, homogeneity, marketability, stability, and scarcity. The negative attributes of land as money far outweigh its positive attributes. They make land an extremely poor quality money. (On the other hand, gold scores very high in all the aforementioned attributes that high quality money should have. Thus, gold makes an exceptionally high quality money.)
    In spite of being a poor quality money, land has been used to back currencies that were redeemable in land. An example of a land-backed currency is the assignat.
    Soon after the revolutionists came to power in France, they established a land-backed paper currency called the assignat. Land that the revolutionary government had confiscated from the Catholic Church, the Crown, and Royalist refugees backed the assignat. Buying land from the government redeemed the assignats, i.e., the government convert assignats into land. When the assignat became legal tender in 1790, it traded at par with specie. By 1796, its value had dropped to zero. Even the death penalty and the Reign of Terror could not maintain its value. In 1796, the government replaced assignats with mandates, another land-backed currency that could be converted into land. Mandates circulated only a few months before they, along with assignats, lost their legal-tender status and became worthless.
    In conclusion, unlike gold, which is high quality money, land is low quality money. Any monetary system based on land or backed by land results in low quality money.

Copyright © 2016 by Thomas Coley Allen.