Tag Archives: Ludwig von Mises

“Government Motors” sells just 281 Chevy Volts in February, Nissan only moves 67 Leafs

This is what happens when central planners try to run the economy – they do not have the ability to know the desires and motivations of millions of individuals.

From Green.Autoblog:

Peruse Chevrolet‘s February sales release, and you’ll notice one number that’s blatantly missing: how many Chevy Volts were sold. The number – a very modest 281 – is available in the company’s detailed data (PDF), but it apparently isn’t something that GM wants to highlight. Keeping the number quiet is understandable, since it’s lower than the 321 that Chevy sold in January.

Nissan doesn’t have anything to brag about here, either (and it avoided any mention of the Leaf sales in its press release). Why? Well, back in January, the company sold 87 Leafs. In February? Just 67. Where does that leave us? Well, here’s the big scorecard for all U.S. sales of these vehicles thus far:

  • Volt: 928
  • Leaf: 173

Ouch. The big questions, of course, revolve around one word: “Why?” Is ramping up production still a problem? Is demand weak? Are unscrupulous dealers to blame? When will sales start to climb? And what are these numbers doing to plug-in vehicle projects at other automakers? We don’t know all the answers, but for more on February auto sales, click here.

[Sources: General Motors, Nissan]

Filed under: EV/Plug-in, Hybrid, Chevrolet, GM, Nissan, AutoblogGreen Exclusive

Tags: auto sales, breaking, electric vehicle, leaf, leaf sales, plug-in hybrid, volt, volt sales

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“Silver money for Americans” – A Critique

A Critique of Hugo Salinas Price’s “Silver money for Americans”
By: Anthony Freeman

Hugo Salinas Price recently published an article titled “Silver money for Americans” where he proposed a method of reintroducing silver and gold as money in the United States. I am compelled to respond with this critique because I feel that his proposals, while of worthy intent, are inconsistent with Austrian Economic ideals and, more so, are incompatible with liberty.

Below is the text of Mr. Price’s article (excluding graphs) with my remarks inserted in blue.

Silver money for Americans
By: Hugo Salinas Price
http://news.silverseek.com/SilverSeek/1288109584.php

I think that my readers will agree that there is a desperate need for some fresh thinking about money in the U.S.

Many respected analysts worry that the expected action by the Fed to apply a new bout of QE after the coming elections is fraught with danger.

Fiat money in the US is in an advanced stage of decomposition and when money rots, the whole social, economic and political structure of the nation rots with it. A return to sound money is urgent. More and more people are aware of the perilous road ahead if nothing is done.

The problems facing the US are so gigantic in nature, that an all-round solution to them is impossible when analyzed in practical terms. A return to sound money is a return to gold and silver as currency. Gold is outstanding as money – but how to realize that goal? Silver is great for popular use – but again, how to regain it?

The only way open to regain a sound footing of real money for the US economy must be by establishing a process through which there will be a gradual and natural return to sound money. It is impossible to reform or improve the present monetary system of the US any other way.

I disagree. All it could take is a tipping point in the understanding of basic economics (whether consciously or unconsciously) among the masses and then the return to sound money can happen quite abruptly. In the age of the internet, where ideas and information can fly around the globe in a nanosecond, change can happen very fast. The inevitable “crack-up boom” described by Ludwig von Mises will be breathtaking to behold. The informed have been fleeing dollars to gold and silver for over a decade now.

The US abandoned sound money in a series of gradual steps; the first metal out of the monetary system was gold, in 1933; the second metal out of the system was silver, in 1965. The return to sound money would follow those steps, in inverse order: silver would return first, because silver has always been the money of the people; gold would return last, silver having opened the way.

Why did silver coinage disappear from circulation in America?  It disappeared because the dollar price of silver rose to a point, back in 1965, where the value of the silver in the silver coin was superior to the value of the coin itself. The result was that most silver coinage was melted down into bullion, which had a value greater than the monetary value of the melted coins. On October 20 a silver dime contained silver worth $1.72! (www.coinflation.com) Dollar inflation caused by expansion of the fiat money supply and expanding credit drove up the price of silver and thus drove silver coinage out of circulation.

The gradual return of silver money to circulation in America

In today’s world, a world where the Fed is probably going to print another huge amount of money out of nothing by “QE2”, explicitly in order to cause the American people to have inflationary expectations, is it possible to think of silver money returning to circulation in America?

The answer is “Yes”! But, it must be done by a new method. This new method will operate gradually by introducing silver money into circulation in parallel with the present monetary system of “fiat” paper bills and digital currency.

In recent years, others have attempted to restore silver money to the US economy. However, these well-meaning attempts have not been well thought out and have failed. You will recall that not long ago, Von Notthaus got into trouble with the Feds due to his misguided work.

Private attempts to restore silver to circulation as money must necessarily fail. Money is an extremely sensitive matter and only the cooperation of government can allow any reform to the monetary system.

I disagree with this statement as well. Evidence supports the fact that many people are already trading with silver/gold as money – irrespective of government blessings. They simply view gold and silver as another currency and they perform currency exchanges when a transaction requires them to use a different currency.

Governments in their present form do not produce. They waste resources at best, and they plunder and destroy at worst. They are self-destructive by nature and will not cooperate in their demise. Any belief that they would willingly support a monetary system that would severely restrict their plunder is not rational.

The powers that be in the US Government must recognize at some point that it is indispensable to the health and continuing existence of the US as we have known it, to restore silver coin into circulation.

Maybe, but I wouldn’t count on it.

At present, its policy is to ignore public discontent; the results of the coming elections will probably do little to change its policy. The discontent of the American people will increase until the government hears the rumble of distant drums. Perhaps then, it will be willing to turn to silver, to appease the population.

Silver money can indeed be restored to circulation in the US, but it must be by a new method. Anything new in monetary affairs must always be suspect and must face an initial opposition. However, we are forced to resort to a new method because the conditions are new: inflation of the money supply and unlimited expansion of credit are new conditions which silver coinage, as it has been created for centuries, has never before faced.

It appears that what Mr. Price is really wanting is State sanction of what a minority of people are already doing: trading with metals as their preferred medium of exchange.

A new method for monetizing silver

Silver went out of circulation because the monetary value of silver coins was engraved upon them. When the market price of silver rose, and the value engraved upon the coins was left behind and below the value of the silver in the coins, the coins became more valuable as bullion than as coins. The coins were melted down. The silver coinage disappeared.

This gives us the clue to restoring silver into circulation: eliminate the engraved value.

In this case, what would be the monetary value of a silver coin with no engraved value?

The answer is that – like a stock – its value would be a quoted value; however, unlike a stock, the quote would not be a market quote but a quote coming from the Treasury.

The legal tender monetary value of the silver coin quoted by the Treasury would take the place of an engraved value. This monetary value would be increased to meet rises in the price of silver, but remain stable at its last quote, during falls in the price of silver.

Stocks prices fluctuate, but the monetary value of a silver coin cannot be allowed to fluctuate, because money must have a stable value. A silver coin, whose quoted monetary value goes up and down, remains a commodity. It cannot be used as money. The Treasury must issue a stable quote for the monetary value of the silver coin with no engraved value.

Here, Mr. Price reveals his misguided inclination to worship the State. He believes that the price of silver must be dictated “from on high”.   He believes in the false authority of government – as if it were some all-knowing God – instead of allowing the free market to dictate the exchange value of silver.

This Treasury quote of the monetary value of this silver coin must always be superior, albeit by a small amount, to the market price of the silver contained in the silver coin. The difference between the market price of the silver in the coin, and the monetary quote issued by the Treasury, would result in a small profit for the Treasury, classically called “seigniorage”. Since the quoted monetary value of the silver coins would be slightly higher than the value of the silver contained in the coins, there would be no profit in melting them down. They would remain in circulation permanently.

More state worship. Why should the Treasury dictate the price?  Why should they take the profit of seigniorage?  Mr. Price is giving unwarranted legitimacy to the State.   Authors like Lysander Spooner have already thoroughly destroyed any pretended legitimacy of the State as it is in its current form.  I recommend Mr. Price read “No Treason VI: The Constitution of No Authority”.

When silver was money per se, that is to say, when silver money was accepted by weight of silver, the Treasury simply received silver from miners, and returned it to them in minted form, with little or no seigniorage. This practice ended in 1873.

The situation is different today. In order for a silver coin to circulate as money, in parallel with paper “fiat” money, it must have a legal tender monetary value. The Treasury must attribute a legal tender monetary value to a one-ounce coin which has no engraved dollar value, in order to fit this coin into the scheme of the prevailing fiat monetary system.

What would really make a difference would be the total elimination of the legal tender laws which severely limit the enforceability of contracts where alternative currencies are preferred.

Besides this, the Treasury must derive a seigniorage or profit, from minting silver coin for the American people; otherwise it will be losing money by issuing these coins to the public. It can earn this necessary seigniorage by issuing a monetary quote, slightly superior to the value of bullion silver, which will move upward according to rises in the price of silver, and thus keep the silver coin in permanent circulation. Further rises in the price of silver will mean further rises in the monetary value of the silver coin. Henceforth, there will be no reason for it to disappear from circulation.

Again, there is no reason for the State to be involved in what the free market can do better.

The rising monetary value of a silver coin, whose last quoted legal tender value by the Treasury cannot be diminished, presents no problem whatsoever to its acceptance as money by the American people. It will be eagerly accepted.

Falls in the bullion price of silver

Should not the monetary value of the silver coin be reduced, when the price of silver falls? The answer is: No!

During the Depression of the 30’s, the price of silver fell drastically. This did not affect the circulation of the beloved silver half-dollars, quarters and dimes. They continued to serve the American people. During that period, the Treasury received a larger profit from minting those coins, because the silver required to mint them cost the Treasury less, but the value – the engraved monetary value – of the coins remained the same.

The same thing will take place when the Treasury monetary quote remains stable when the price of silver falls: the Treasury simply makes a larger profit because its monetary quote, which takes the place of an engraved value, does not diminish.

This situation would not exist for very long since any price difference would quickly be absorbed by the market. If silver were under-priced in relation to the “Treasury quote”, the spread would quickly diminish as the actors in the market  trade their overpriced government silver for the under-priced silver. Basically, what would really happen is people would spend the overpriced silver coin more freely creating an inflationary situation until the price discrepancy was closed.

The rising value of silver, which will continue as long as the fiat monetary system is in operation, will allow Americans to save in a very simple medium which derives its value from its silver content and becomes more valuable when the price of silver rises. This is the greatest possible incentive to popular savings, so desperately needed in America today. (Of course, the fundamental importance of savings is irrationally denied by today’s Keynesian monetary authorities, who are now facing a great collapse which will sweep them away. Britain, the great ally of the US, has announced a fiscal policy which in effect, turns its back on Keynesian economics.)

The falls in the price of silver will not affect savers, for the monetary value of the coin will not fall together with the price of silver. It will remain stable, an absolutely essential element in any monetary unit. As stable as American silver dimes, quarters and half-dollars were during the Depression, when the price of silver fell.

My previous point still applies here. If the government-priced coin contains less silver than the silver bullion that it can buy, the arbitrageurs will step in and trade their overpriced government coin for silver bullion and the gap will disappear quickly.

The public will value silver coins more highly than paper money. The silver coin, whose quote will increase with an increase in the price of silver, will assure increased or sustained purchasing power for the public.

QE2 is supposed to “stimulate” the economy by putting more purchasing power in the hands of the public by creating more money. However, the effect is inverse, because increases in the money supply diminish the value of the dollars already in circulation and cause prices to rise. This is classic monetary inflation and this is what the Fed wants.

The monetized silver coin will not be inflationary for two reasons. The first reason is that its “velocity of circulation” will be near zero, because these coins will go directly into savings (“Gresham’s Law”). People will use paper bills and bank deposits to pay their expenses, and retain silver as savings. The second reason is that the increases in the monetary value of the coin will reflect the increased value of a tangible asset. Purchasing power that increases because what you own – silver money – is worth more is completely different from increases in purchasing power because you have more money that the Fed has created out of nothing: such money will be falling in purchasing power and there is no reason to keep it for savings.

If dollar inflation – as explicitly proposed by the Fed – forces the price of silver to rise, the monetized silver ounce will rise in value with it. This is silver money that is inflation-proof.

This, of course, is nothing new. It is already happening without a government-monetized silver coin.

It is very important to reiterate that the US dollar would continue to be the money of the US. The silver coin would exist and float in parallel within the present monetary system; in the long-term, it is possible that it might gradually and naturally displace the present system of “fiat” money.

Since it is already diametrically opposed to the current incentives to people in government – which are primarily to take from some and give to others – the only way for silver to substantially displace “fiat” money is to accelerate fiat’s inevitable collapse through the education of the plundered class.

A proposal for the introduction of a silver coin into permanent circulation in the United States:

1. The Treasury shall mint a new silver coin containing one-ounce of pure silver. No engraved monetary value shall appear on the coin.

2. The Treasury shall issue a monetary quote for the coin upon the following basis:

To the market price of the silver ounce shall be added the cost of minting. The sum shall be multiplied by 1.1 to give the Treasury a seigniorage or profit of 10%. The result shall be increased to the nearest multiple of 50 cents, and this shall be the monetary quote for the silver one-ounce coin.

(Note: the cost of minting, the multiple to be adopted for seigniorage as well as the multiple for purposes of rounding-out the monetary value of the silver one-ounce coin, are all suggested and can be modified to suit.)

3. When the price of silver rises and impinges upon the seigniorage of the Treasury, the Treasury shall issue a new, higher monetary quote to restore its seigniorage to 10% (plus profit from rounding-out the monetary quote.)

4. When the price of silver falls, the Treasury shall retain its last monetary quote for the silver coin and not reduce it under any circumstances.

5. The Treasury shall mint these silver coins in amounts sufficient to satisfy the market and prevent the appearance of premiums upon the monetary quoted value, because such premiums would seriously detract from the use of the silver coins as money.

6. The Treasury shall be allowed a period of six months to ignore speculative peaks in the price of silver, a period during which the Treasury shall not alter its last quote. (During this period, the American people can be expected to hold on to their monetized silver coins and not turn them in for a profit to those who wish to smelt them for their bullion value, if they know that after a period of at most six months, a new and higher monetary value will be assigned to their coins.)

An example of how monetization would be done

See the graphs at the end of the article.  The first one shows us the spot silver price from 1995 to 2010 (data from Kitco). And the second one shows us the monetary value of the American silver coin, through this period, if monetized since that time.

The formula to arrive at the monetary value – Treasury quote – of the silver coin is as follows:

(Silver closing price + Cost of minting) x (1.1 – to add 10% seigniorage) and the result, rounded to nearest multiple of .50 cents.

At the beginning of our exercise, on January 3, 1995, the silver price was $4.84. Add 50 cents for minting costs. Then take the result, 5.34, and multiply by 1.1 = 5.87. Then, round out to nearest multiple of 50 cents = $6.00. So, the first monetary quote for the silver coin would have been $6 US dollars, if the Treasury would have begun on January 3, 1995.

Anyone holding this monetized silver coin would have been able to pay for purchases with this coin, or deposit it in a bank account. (The bank, however, would not be obligated to return the silver coin! The monetary system of the U.S. would continue to be based on the US dollar – whatever that is, for Greenspan himself was not able to define it, when Ron Paul asked him to do so.)

On March 31, 1995, the price of silver rose to $5.16 dollars. So, we repeat the exercise with the new price of silver: 5.16 for the silver, plus 50 cents minting costs. Take 5.66 and multiply by 1.1 = 6.22. Since this amount exceeds the previous quote ($6.00), we have to adjust it upward. Round 6.22 out to nearest 50 cent multiple = $6.50 dollars, the new monetary quote for the silver ounce. The silver one-ounce coin would have had a new monetary value of $6.50 dollars, as against the $5.16 dollars of silver in the coin.

For the following months, the silver price kept on rising, reaching $6.03 in May 1995, and the monetary value of the ounce would have followed it, reaching $7.50. This rally ended in the summer, and the silver price fell to $5.08 in July 1995. In spite of that, according to this method, the monetary value of the ounce would have remained stable at the last monetary quote: $7.50.

Calculation of the first Treasury Quote and the following quotes:

 

Date

 

Silver price

 

Cost of
minting

 

Cost

 

Seigniorage
(10%/cost)

 

Total cost.
Quote before rounding (*)

 

Treasury Quote

 

1/3/95

 

4.84

 

.50

 

5.34

 

.53

 

5.87

 

$6.00

 

3/31/95

 

5.16

 

.50

 

5.66

 

.57

 

6.23
Since this new cost surpasses the current Treasury quote ($6.00), a new quote is required.

 

$6.50

 

4/18/95

 

5.65

 

.50

 

6.15

 

.61

 

6.76
Same case as above.

 

$7.00

 

4/19/95

 

5.91

 

.50

 

6.41

 

.64

 

7.05
Since this new cost surpasses the current Treasury quote ($7.00), a new quote is required.

 

$7.50

 

05/05/95

 

6.03

 

.50

 

6.53

 

.65

 

7.18
In spite of the silver price peak during the season, current quote ($7.50) still covers the costs, so no new quote is required.

 

$7.50

 

03/07/95

 

5.08

 

.50

 

5.58

 

.55

 

6.13
In spite of the price of silver fallen to previous levels, according to the plan, the Treasury quote remains unchanged.

 

$7.50

(*) As you can see, the ‘Cost before rounding’ includes the current price of the silver, the cost of minting, and the minimum seigniorage for the Treasury – which is 10%. So, when this calculation surpasses the current Treasury quote, it implies that the minimum seigniorage and minting costs are no longer covered; a new quote is required to restore full seigniorage.

On October 22, 2010, the highest recent quote, which took place on October 14, 2010, would place the legal tender monetary value at $27.50, calculated as follows:

 

Date

 

Silver price

 

Cost of
minting

 

Cost

 

Seigniorage
(10%/cost)

 

Total cost
Quote before rounding

 

Treasury Quote

 

14/10/10

 

24.49

 

.50

 

24.99

 

2.49

 

27.48

 

$27.50

Thus would the monetized silver ounce coin remain permanently in circulation and never again go to the refinery to be melted down, since the Treasury would be assigning new and higher quoted monetary values to the coin as the price of silver rose.

The consequences of monetizing a one-ounce silver coin

Humans can never know all the consequences of any action. We can foresee certain things but must be ignorant of the endless consequences of everything we do. We act because we think that by acting, we will attain a better, preferable situation to that which we have if we do not act. We generally evaluate any action and predict the near-term consequences, expecting to improve our condition.

For long-term consequences we have to rely on philosophy and Austrian Economics.

If only Mr. Price would have used Austrian Economic reasoning when writing this piece…

Can we know all the consequences of putting a silver coin into circulation in the United States? Certainly, we cannot.

However, we know that it will be good for millions of Americans to be able to save silver money and prepare themselves for any adversity; to be able to save in order to have a secure basis for retirement and old age; to be able to save in order to have that precious thing called “peace of mind”.

We also know that powerful interests will not be happy with this measure, because it will cause those interests losses and pain. The banks will not be happy – they want the public to deposit their savings with them; they will not be pleased with the idea that Americans can save excellently by saving their ounces at home.

We know that silver empowers the individual and protects him from tyranny.

We know that those whose lives are linked to tyranny will not approve.

Here is Mr. Price’s most obvious contradiction when he falls into the trap of what Hayek called “the fatal conceit”: the belief that central planners know better than the millions of individual actors in the marketplace. In one breath Mr. Price states that the U.S. Government should be the one to implement his plan for freedom via the introduction of a state-sanctioned silver standard.  And in the next breath he claims that this same state-sanctioned silver standard will deliver people from that same tyrannical system: that very system which is government in its present form.

We are confident that putting silver money into circulation in the U.S. will have numberless good effects; that developments favoring prosperity will present themselves spontaneously, thanks to the silver coin in circulation. New things will happen, things like Treasury silver certificates for silver ounces held by the Treasury, which will allow the payment of larger amounts of silver, without the cumbersome movement of heavy weights of silver. Or things like Custody Deposits in banks, where the silver remains the property of the depositor, and can be moved to other accounts by electronic means.

American demand for this coin would be absolutely enormous and undoubtedly force the price of silver much, much higher; the concomitant rise in the monetary value of silver savings would contribute to the recapitalization of the population and most importantly, infuse the American people with hope and optimism regarding the future, fundamental psychological elements of any society.

A humanist philosophy and Austrian Economics allow us to foresee that the favorable consequences of putting a monetized silver coin into the hands of Americans would be vast and reach even into the international sphere, where the American silver coin could easily become an international currency, supplementing the American dollar which is now increasingly coming into disfavor around the world.

This silver money would be in circulation permanently and its existence would be independent of the stability of the financial system. It would be immune to banking crises and since it would not be debt-money, fluctuations in the rate of interest would not imply a shrinking or expansion of the quantity of this money in circulation. It would be immune to dollar devaluation, since the price of silver is determined in the world market for silver.

Monetizing the silver ounce, with a Treasury quote, is not a panacea. It will not solve every problem, for the problems are immense. But it will be a balm for the American spirit, so damaged and divided at present, and it will be a seed from which mighty institutions can grow.

It is up to Americans to exert themselves toward the end of recuperating silver as everyday money for Americans. The consequences of achieving this measure would be world-shaking. I have shown how it can be done, and can do no more.

Addendum

This essay proposes the monetization of a silver coin containing one-ounce of pure silver. It is quite important that the weight of silver in the coin be expressed upon it. Otherwise, a silver coin with less than one ounce of silver might be called “the American Silver Eagle”, for instance, in which case the necessary relation of the coin’s monetary value to a specific weight of silver could easily be lost. Such a coin could be retired from circulation by the government and substituted with another “American Silver Eagle” containing less silver. There are many precedents for such fraudulent behavior in other nations.

I’m Fed Up With Constitution Worship!

From LewRockwell.com:

I’m Fed Up With Constitution Worship!
by Gary D. Barnett

I must say that I didn’t always feel this way, but I am now truly sick of hearing every day about how we should uphold, defend, and worship the U.S. Constitution. Yes, I am aware that if it were followed to the letter that we would all be somewhat better off, but was that ever the real intent? I think not.

As I perused an article recently in the Christian Science Monitor titled “Why Do Americans Get the Constitution So Wrong” by Lion Calandra, I thought it was time to expose some of the misconceptions about our so-called reverent “founding” document. The first few words of that article set the stage for my rant.

The opening statement: “On this day, 223 years ago, the U.S. Constitution was born, giving Americans the freedoms that they hold dear, the freedoms that men and women have died to defend.”

Obviously, the author also got it wrong, because everything in the above sentence is patently false. Our freedoms did not come from any political class or due to any drafting of a political document. Our rights and freedoms are God-given and inherent. They are natural human rights, and cannot be bestowed by men! Our natural rights to life, liberty, and property encompass all others; this a fact barely acknowledged by most. Without the right to life and liberty, no other right can exist. With the right to life and liberty, all other rights are evident.

Also, the notion that men and women died to defend our freedoms can only be correct if one considers those very few who have died fighting against our own federal government’s encroachment against liberty. If the intent here is to laud those who died in warfare, then again, the author is completely wrong. Those who fight in wars are defending and serving the government, and therefore are harming freedom, not protecting it. This may seem a harsh statement to some, but it is this truth that escapes almost all Americans. If more understood this, we would all be much better off. War is the health of the state, and therefore is antithetical to freedom. U.S. wars are directly responsible for a more powerful government and less freedom; the opposite of what is taught in the government-run schools, and what political pundits constantly spew.

Why was the current U.S. constitution drafted and ratified in the first place? Was it because our founders believed that they were doing more to protect liberty? Did they think that this particular document would serve to expand and protect our freedoms? Were the Articles of Confederation, our constitution at the time, anti-freedom or inadequate? Did that constitution allow the federal government more or less power than the new one?

If one answers these questions honestly, many other questions will arise, and the answers to those questions may cause resentment to replace respect. In fact, our current constitution greatly expanded government power over the people, not the other way around, as most believe. Just consider one example: In the Articles of Confederation the federal government had no power to lay and collect (by force) taxes. Any money needed had to come voluntarily from the individual states. In Article 1, Section 8 of our current constitution, the federal government has virtually an unlimited power to tax. This fact alone should have been reason enough to not ratify the constitution 223 years ago. Of course, most of the rest of those powers given to Congress in Article 1, Section 8 should have also caused great concern for anyone sympathetic to liberty.

The Anti-federalists had it right all along. The Articles of Confederation were certainly not perfect, but that constitution was a damn sight better than the one we have now. One single reading of Article 1, Section 8 of the current U.S. Constitution should literally scare the living daylights out of all who believe in freedom and liberty. In my opinion, Hamilton and his followers were able to fool and then co-opt enough of the political leaders of the time to bring about a massive change; a change that ushered in a much more powerful central governing system. This was entirely by design in my opinion, and was never intended to advance and protect the freedom of the individual. Had that been the case, slavery would never have been sanctioned by that same document. Why this system is so revered is beyond me. It can only be due to long-term indoctrination. I have been told since childhood of the greatness of the constitution by peers, by the school system, by politicians, by the media, and by virtually everyone else able to utter the spoken word. Considering this, it is no wonder that this mediocre document is worshiped by so many.

It should be obvious that I am not attempting to fully explain or outline the constitution, nor am I attempting to put forth any expert legal opinion concerning it. This has been done over and over again. I am simply pointing out that this supreme law of the United States is not what it seems. Things are always done for a reason, and in my opinion, the constitution was drafted so as to expand the powers of the national government, and weaken the powers held by the individual states and the people. This has certainly been the end result. I think it is important to remember that many of the founders of this country, while courageous in their fight to free themselves from English rule, were still politicians, and as such had their own agendas. These agendas did not always run parallel with individual freedom, especially considering the Hamiltonians. While this may be hard to swallow for some, it is nonetheless true.

What does all this mean? In my mind, it simply means that a piece of paper does not freedom make. None of us gained freedom due to other men bestowing it upon us. None of us gained our freedom due to men drafting constitutional documents. We gain our freedom naturally at birth, and from that point forward, it is up to each individual to protect it. Freedom can only exist and thrive when individuals understand its importance and defend it at all costs. Not against monsters from abroad as is the opinion of most, but against our own government. No constitution can accomplish this, and any constitution is worthless without the ideas of freedom and liberty living in the hearts and minds of individuals willing to force its compliance. There are some who have the freedom philosophy living in their hearts and minds, but there are very few who are willing to risk all to fight for it. This dynamic will have to change before we again become truly free of this now tyrannical government.

I think the time has come for all of us to reevaluate the meaning of freedom. Freedom comes from within and is natural to the human species. Men cannot give freedom but men can take it away. All government operates by force, and force is the absolute opposite of freedom. Government is never a friend to liberty, so government should be held back and controlled. If some set of rules such as a constitution is the desired vehicle to accomplish order, then those set of rules should not only be strict and limited, but enforced by the people themselves. Without this control, we end up in 2010 America.

The following excerpt from Human Action thoroughly illustrates the antagonism between freedom and government:

It is important to remember that government interference always means either violent action or the threat of such action. The funds that a government spends for whatever purposes are levied by taxation. And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know that any disobedience or resistance is hopeless. As long as this is the state of affairs, the government is able to collect the money that it wants to spend. Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

I will put my faith in God, not men. I will have faith in freedom, not constitutions. Our salvation and return to liberty lies not in faith in men residing in the halls of congress, but in our belief in us as free and sovereign individuals.

September 25, 2010

Gary D. Barnett [send him mail] is president of Barnett Financial Services, Inc., in Lewistown, Montana.

Copyright © 2010 by LewRockwell.com. Permission to reprint in whole or in part is gladly granted, provided full credit is given.

Money, Silver, Economics and Mexico – Hugo Salinas-Price


Hugo Salinas-Price

The Daily Bell is pleased to present an exclusive interview with Hugo Salinas-Price (left).

Introduction: Hugo Salinas Price, 75, is a successful, retired businessman who lives in Mexico. He has been a follower of the Austrian School of Economics since his youth. He has written three books in Spanish on how and why silver should be instituted as money in Mexico, in parallel with paper money, and numerous related articles in English and Spanish, posted at his website. His organization, the Mexican Civic Association Pro Silver, is actively lobbying the Mexican Congress to approve legislation, which will institute the pure silver “Libertad” ounce as money.

Daily Bell: What is your campaign in Mexico for sound financial policy?

Hugo Salinas-Price: I actually avoid discussing “sound financial policy” because one can argue about that till the cows come home. During the last fifteen years I have devoted my efforts to one single aim, and that is to achieve the monetization of a silver ounce coin currently minted by our Central Bank. This coin has no engraved monetary value and is called the “Libertad” coin; it can very easily be turned into a monetary coin, that is to say, a coin with a monetary value. As such, anyone owning such a coin could, if he or she wished, be able to pay any bill or debt denominated in Mexican pesos.

The monetary value of this coin would be slightly higher than its bullion value; the monetary value would not fluctuate according to the price of the silver ounce, but its monetary value would be raised if the bullion price of silver rose and closed in on the monetary value. The Central Bank would give the coin its monetary value, according to a formula in the proposed legislation.

If the price of silver fell to $1 dollars an ounce, the monetary value of the coin would remain where it was last pegged. (But it would still be better money than any paper or digital money in the world!)

On the other hand, if silver should go to $50 dollars an ounce, this coin would remain in circulation, useable as money, because then its monetary value would be about $57 dollars, and stay there until a further rise in the value of bullion silver.

The monetized silver ounce would be an excellent refuge for savings and would attract them irresistibly. You don’t need a bank account, you don’t even have to know how to sign your name, to invest your savings in this simple and inflation-proof way.

This coin would be better money than the US dollar and I expect many Americans would be wanting to own these “Libertad” ounces once monetization is realized.

Daily Bell: Has Mexico always suffered from an unsound economy? Does Mexico now have a stable political structure?

Hugo Salinas-Price: The first question is like asking me “When did you stop beating your wife?”

Seriously, I think the Mexican economy is sounder than the US economy – which isn’t saying too much. The Mexican economy is much less complex than the American economy. Think of the Mexican economy as a low, wide pyramid or mound. The American economy is by comparison a skyscraper. Personally, I don’t like to occupy hotel rooms above the 12th story, thinking of the possibility of a fire. Think also of all the things that can go wrong for a skyscraper: a power outage, and you and your family are on the 30th floor. No elevators, no water, no refrigerator…you get the idea. The American economy is vulnerable in ways that the Mexican economy is not.

Mexicans have mostly fully-paid housing – the house may be very modest, such that most Americans would not care to live that way, but – it is paid for! Mortgages are not widespread; during recent years there was an increasing use of mortgages but on the whole, the Mexican population lives in housing that is paid for.

Mexican indebtedness is not as great as in the US; because until recently, 70% of the population did not have bank accounts – which given the behavior of banks in general, is a very good thing.

Mexicans, unlike Americans, are used to bearing with hard times. They can “cope” with situations which would drive an American to despair. We do not have a government that prints the World’s money, so we haven’t been as coddled by all levels of government, as the American people.

About political stability: I don’t think American political stability is stronger than ours. We don’t have Tea Parties and we don’t think about taking up guns and holing up in our houses. Matter of fact, I think I see a Revolution brewing right in the old U.S. of A. But of course, we can always be the object of “Regime Change” by the Powers That Be in Washington, D.C. It’s happened before, though most Mexicans are not aware of the fact that our Glorious Revolution of 1910, was a “Regime Change” Operation, carried out covertly by the U.S., because Mexico was getting too prosperous and inviting European Capital into the country, in preference to American Capital. So, it can happen again – any excuse will do. How about: “The Drug War in Mexico threatens American security”? That ought to do the trick.

Daily Bell: Give us some background on yourself. Where did you grow up? Where did you go to school and how did you get interested in business?

Hugo Salinas-Price: I grew up in Mexico City, the eldest of six kids. My father was a Mexican from Monterrey, Mexico. My mother was an American from Bryn Athyn, PA. Our family all spoke both English and Spanish from childhood. We still slip from one language to another when we talk. Most of my friends as a boy were sons of Americans living in Mexico. I went to High School in my mother’s home town, which is a religious community, and enjoyed it greatly. I tried three different Universities looking for a career, and dropped out of all three. I was particularly unhappy at the famous Wharton School of Business and Finance, at the U. of Pa.

After three strikes I was out and decided, at the ripe old age of 20, that I better get to work and stop wasting money. So, I got a job from my father. Two years earlier, he had set up a small company manufacturing radios and I got the job of manager. So I started at the top and did what I could to stay there! Well, fortunately we had a bright man as engineer, he was a Mexican who had been interested in electronics since he was boy. One day, this man asked me “Mr. Salinas (no employee of mine has ever called me by my first name) why don’t we manufacture TV sets?” I said, “Are you out of your mind? That’s a terribly complicated technology, we can hardly make good radios…” But he insisted, “No, we can do it; it’s not such a big problem.” So I said, “Well, build a sample; if you can build a TV set, I’ll give you a new car…”

So we got into TV business, and that saved that tiny company. If we had not done that, in not more than two years we would have gone broke. I didn’t realize this until many years later. In 1954 I married; my wife and I fell in love at first sight, she was 15 and I was 18. The very best decision I ever made in my life!

Elektra couldn’t sell our sets by selling to retailers – there were a dozen manufacturers offering retailers their goods, with well-known brands; our brand was unknown. So, we went to direct sales.

Once we were in direct sales, we added other household goods to the stuff our salesmen could offer the public. Our salesmen were heroic, they knocked on doors from morning till night, and got us our orders.

In 1959, I began to set up our stores, where salesmen could take their customers to view the merchandise. So that’s how we got into retailing. We sold on terms – credit up to 24 months. How to sell on credit – and collect! – was something learned from my father, who learned it from his father. That’s what we are still doing today, with about 1,000 stores.

Daily Bell: How big did Elektra get – and was it your biggest achievement in business?

Hugo Salinas-Price: Elektra has gotten rather large – stores in Mexico, Guatemala, Honduras, Salvador, Panama, Peru, Brazil and Argentina. (Argentina is the pits, let me tell you.) Elektra owns a bank, which has a very large deposit base among the same people who are its customers. Very solid bank, I am pleased to say. Our Systems department is vast – one of the largest in Latin America. I started up our Systems in 1968, on a ten-year plan to get the company wholly computerized. This finally happened in 1983. We are totally up-to-date in this technology.

Well, my biggest achievement in business happened in 1987, when I was 55. I didn’t know it was that, at the time. What happened was that – I got myself out of the way. Elektra had 59 stores, no debt, was running just fine; my eldest son, who was 32, had been working at Elektra for the past seven years, and he knew everything there was to know about it and was much more active and energetic than I; so one fine day, I just up and resigned, to everyone’s great surprise. Cancelled all Powers of Attorney, Bank signatures, the works. Son Richard took over that day and – that was the best business decision I ever made!

Daily Bell: Is it easy to build a business in Mexico? Why did you decide to retire from it?

Hugo Salinas-Price: Maybe it’s hard, maybe it’s easy. For those who have the knack, it may be easy. I don’t have that knack. Let me tell you I see a family that sells tasty food out of a pick-up truck at around 11 a.m. weekdays; they set up business outside of the building where I have my office. That family pays zero taxes and is raking in money every day, customers galore. A lot of Mexico lives this way, under the taxman’s radar, Praise God!

Now why did I decide to retire? I am not really a businessman. I got a job and worked at it “in my fashion” – never got a degree. I enjoyed my work very much, designing radios and TV sets and “Combos”, and opening stores. Actually I am more of a thinker than a man of business. I have very few friends. Don’t play golf. I have a large library, I like to collect books. I saw that Richard had much more push than I did, that he knew exactly what was going on in the business and more enthusiasm than I about running the business. So, I just handed over the reins. I have never missed not being No. 1. And I never will. It appears that very, very few men are willing to give up being No. 1.

Daily Bell: Does Mexico have a large middle class? If not, why not?

Hugo Salinas-Price: No, I guess I would have to say we do not have a large middle class. I am worried that our middle class may begin to contract in numbers, given the world situation of excessive debt everywhere.

Why is our middle class in danger of contracting? First of all, I have to express my opinion that the US middle class that prospered so much after WW II was to a large extent based on an expansion of credit which took place in the US after WW II and up to 2007. So, as that expansion appears to be over, you may see an unpleasant phenomenon take place – people who thought they were in the middle class, reduced to poverty. Present US policies are headed toward that outcome.

The problem for Mexico has been that, as in all countries everywhere, its governments have attempted to stay in power by spending money they don’t have in order to get the votes. So this spending hits the value of our money and cancels the savings of those who would make up the middle class. This policy hits us harder than Americans, because our money is not welcome outside of our borders, unlike Americans whose Fed can print up money and allow Americans to export it to buy a lot of nice things all over the world.

Daily Bell: Is Mexico a bifurcated state between upper class and the poor? [If so] why is it?

Hugo Salinas-Price: I think that a “bifurcation” – in other words, a division into two – is one of the objectives of Communist agitation: to promote “class consciousness” through envy, mainly. This way of advancing in politics has been going on for centuries. Julius Caesar used it and it worked for him – and he was no Communist.

I can truly say that I do not feel we are in a “bifurcated state” – to promote this feeling is the policy of Chavez in Venezuela, as it has been the policy of Castro in Cuba. My opinion is that there are always and everywhere, rich and poor, but this only becomes a problem when a politician or a political party wants to create the problem for their own advancement. Perhaps we shall face that problem further on – as you well may, yourselves.

Daily Bell: How bad is the drug war in Mexico? Do you think drugs should be made legal?

Hugo Salinas-Price: The drug war is mainly between those who are in the drug dealing business and are fighting over territory. But this war also breeds criminals who take up other ways of getting money, by assaulting peaceable citizens. A US President once told a Mexican President: “Mexico is the spring-board for drugs into the US.” To which our President at once replied: “If we are the spring-board, you are the swimming pool.”

Legalization of drugs would greatly diminish the problem of outlaw drug lords in Mexico – but I mean, legalization in the US. We have a drug war, because drugs are illegal in the US and thus fetch a very high price. Legalize the business in the US and the price of drugs will come down to the price of corn. Mexicans will go back to raising vegetables. Remember, it was Prohibition that made Al Capone rich.

Daily Bell: Is the drug war Mexico’s fault, America’s fault or both? Is Mexico a failed state?

Hugo Salinas-Price: We had marihuana in Mexico when I was a boy. Only a few people indulged in it. Nobody cared if they did. Cocaine was in use in the US in the 30’s – Cole Porter wrote it into one of his songs: “I Get a Kick Out of You”.

Personally, I blame the artificiality of life in our times – caused by funny money, which distorts all aspects of human life – for the hunger that people feel for drugs, to forget their insecurity.

Mexico a failed state? Not yet, by any means! The US may be a failed state long before Mexico falls into such a condition. If we can monetize a silver coin – and believe me, it is quite possible we shall be able to do this – can a State which has silver money be called a “failed State”? Note well: our politicians are far, far less corrupt than yours! Ron Paul, a noble exception among US politicians.

Daily Bell: Would a more stable currency help Mexico?

Hugo Salinas-Price: Undoubtedly. But all currencies in the world are essentially unstable since they are all fiat currencies. There can be true stability only under a gold standard.

Daily Bell: What is your plan for the silver Mexican dollar? What is it called?

Hugo Salinas-Price: My plan is to have the Mexican silver ounce monetized, i.e., turned into ready money. It is called the “Libertad”. This coin would come into circulation in parallel with paper and digital bank money.

People would then have the option of obtaining this coin for their savings – on which no interest would be paid; unlike deposits in banks on which the banks pay interest, people would save these coins even though they pay no interest. This is as it should be: there is no reason for people to expect interest on their savings, if what they are saving is worth saving.

Policy all over the world today, is to promote consumption. This is total nonsense! Savings must come before, long before consuming.

Families who have savings are happy, satisfied people. They are secure in the knowledge that they have solid savings for emergencies and for their retirement. This makes for a happy nation. And that should be the object of politics.

Daily Bell: Will your plan come to fruition in the near future? Does it have much support?

Hugo Salinas-Price: I think there is a good chance it will come to fruition in the near future. We were almost there, late last year. The terrible condition of the world, in monetary terms, is a plus for the silver coin. I have a book out just recently, where I mention all the warnings I made before the present chaos, announcing the coming disaster. The Mexican Congress made a poll of public opinion, last year, and found that 81% of the people want silver money.

We have wide support in the Congress, both Houses. Just yesterday I had a very heartening meeting with one of the leaders, he is all for the measure. He is President of the Mexican College of Economists and influential. I have met with energetic women in the Congress who are all for silver. (Silver is a tradition in Mexico, not yet forgotten.) Yes, there is lots of support. The main opponents are those arrogant individuals who have Post Graduate degrees in Universities such as Stanford, Princeton, Yale, Harvard, etc. who think that what they learned in the US is Gospel Truth. Their minds are closed. Not so the majority of our Congressmen and women, who still enjoy common sense.

Daily Bell: Why did you decide to devote your life to this cause?

Hugo Salinas-Price: When I was a boy, I had an excellent man as teacher. He was an Englishman born in the Victorian era. He made us memorize poetry every week. Do you remember this:

“Tell me not in mournful numbers
Life is but an empty dream.
For the soul is dead that slumbers
And things are not what they seem.

“Life is real, life is earnest
And the grave is not its goal.
Dust thou art, to dust returnest
Was not spoken of the Soul” …

“Let us then be up and doing,
With a heart for any Fate.
Still achieving, still pursuing,
Learn to labor and to wait.”

Daily Bell: A Psalm of Life by the great poet Henry Wadsworth Longfellow. You are obviously a literary person, as your many articles illustrate. Are you a critic of Mexico as it is?

Hugo Salinas-Price: No, I don’t think I am a critic of Mexico as it is. Why write about our defects when we are all conscious of them? What I attempt to do is to inspire our people to rise to what they can and should do, and specifically, to inspire them to the greatest possible thing they can do: monetize a silver coin.

Daily Bell: What does Mexico have to do to become a successful state in your opinion? Is America the problem?

Hugo Salinas-Price: I wouldn’t say that Mexico is an “Unsuccessful State” at all. It has problems which are common to the whole world and which mainly arise from the world’s having abandoned real money by stages, beginning in 1909, or 1873 if you want to go back that far, when the US government decreed that the Treasury would no longer continue to accept all the silver offered to it and return it minted into dollars.

I must admit that the US has forfeited its leadership in the world, over which it had such mighty power after WW II, by unwise behavior in the sphere of banking and money. You have an oligarchy in power, actually running the US Government behind the scenes, and they want to retain their power at all costs, even sacrificing the American People to their ends. Together with their brothers in the UK, they are the prime obstacle to a reform and renewal of Finance and Money, to put the world on a path to sustainable prosperity. I believe they have put a rope around their own necks due to their obstination and avarice. The rope is closing in on them – note the rising gold price.

A strong state is a generous state. As the US has become weaker and troubled, it has become easier for people to take out their frustrations on minorities. Thus the illegal immigrants are in for it. The politicians approve of this – it distracts people from thinking about the true causes of their troubles. Not that I blame Arizona for the legislation it is putting into place regarding illegal immigrants. This measure has provoked wrath in Mexico, but the fact is, Arizona is clearly within its rights.

Daily Bell: Is America becoming a failed state?

Hugo Salinas-Price: I don’t think so, not yet. But popular discontent may cause a lot of grief in the US. Americans are not used to hardship.

Daily Bell: Are you an Austrian free-market economist?

Hugo Salinas-Price: I am an economist without a degree. If I had a degree in economics, I would probably not be an economist. Yes, I consider myself an Austrian economist – but a Neo-Austrian economist. You see, Professor Antal E. Fekete of Budapest, has improved some points of the Austrian theory as left to us by the eminent Ludwig von Mises and Murray Rothbard. He is the founder of a Neo-Austrian School of Economics. Those who have accorded Mises and Rothbard iconic status, don’t think there can be any improvement upon their theories. I disagree and I think that Mises, a fine gentleman of my acquaintance when I was young, was great enough to accept well-founded observations which improved upon his basic ideas, without discrediting their underlying value.

Daily Bell: Are free-market economics having an impact in Mexico?

Hugo Salinas-Price: Yes, but the impact has not been favorable. Because “free market economics” was thought up when gold was the only money that existed. Economists of that time could not imagine a world without true money such as we have today!

It turned out that a free-market without the gold standard caused the de-industrialization of the US, Britain and Europe – and Mexico, too.

Deindustrialization causes unemployment, of course. Since the deindustrialization occurred while we were trying out “free market economics”, the deindustrialization has been blamed on “Free Market Economics”, when the real cause was going off the Gold Standard. Very, very few anywhere, see the relationship. I have written briefly about this, in my article, “Gold the Protector and Creator of Jobs.”

You see, if we had the gold standard, Americans and Mexicans could simply not buy from countries that did not buy from the US and Mexico in return; that being the case, if the gold standard were reinstated jobs would sprout like mushrooms in a matter of months. Protectionism is only a Band-Aid.

Daily Bell: Where does Mexico go from here?

Hugo Salinas-Price: There is going to be terrible turmoil in the world. No one can know what is in store.

Daily Bell: Where do you go from here?

Hugo Salinas-Price: This is my last decade! From here, the grave.

Daily Bell: Are you optimistic about Mexico’s economy?

Hugo Salinas-Price: Not too optimistic – unless we monetize the silver coin. I think it will be a seed from which a multitude of good things will grow, beginning with an awakening of a spirit of confidence and pride in our country.

Daily Bell: Are you optimistic about the West’s economy?

Hugo Salinas-Price: Without the gold standard, we are at a dead end. A very dangerous place to be.

Daily Bell: Is America headed for a depression or hyperinflation? How about the EU?

Hugo Salinas-Price: I think the US is already in a Depression, but the Media are keeping the news from the people. If Bernanke’s creation of massive amounts of money ever gains traction by the money filtering down to the people, then inflation will take hold, and Bernanke will not be able to stop it, try as he may. The genie will be out of the bottle!

Europe is in for a bunch of trouble. I do have a suspicion that the EU was deliberately attacked by US Finance. Certainly, Europe dug its own grave with their version of funny money, although they kept up appearances pretty well until given a strong push by the rating agencies. Perhaps the European Monetary Union will fall apart and the euro may disappear as things unravel.

Daily Bell: Will the EU and the euro survive?

Hugo Salinas-Price: The euro is a fiat money construct and is destined to fail eventually. The EU was a good idea, but based upon sand. I remember that von Mises wrote that the Austrian Empire, which was a collection of nations with different languages, religions and customs, was held together by the gold coin of the Empire. When that went, the Empire was doomed. I suspect that unless the EU wakes up and initiates a move to a European gold standard, they too are doomed. The buying of gold in Europe is a signal that instead of being fought or ignored, it should form a part of planning for the future of Europe.

Daily Bell: What’s the biggest problem in the world economically today?

Hugo Salinas Price: Without a doubt, the enormous “structural problems” which the economists talk about – imbalances of trade, where some countries export lots of stuff and other countries buy quantities of that stuff but have nothing, or little, to sell to the exporting countries – this problem has caused China for instance, to accumulate enormous “reserves” of dollars and euros, while the US and the West in general have lost their industries. This is the main problem in the world today and it cannot be remedied without the gold standard.

Only through the gold standard can the world achieve peace and harmony in economic relationships. Only the gold standard can prevent a huge country like China, from devastating the industries of the “developed world”.

Daily Bell: Is that the biggest problem in South America and Central America too?

Hugo Salinas-Price: I certainly do think it is the biggest problem today. However, I wouldn’t go so far as to say it’s the only problem. People have different sets of values, you know. Not everyone everywhere wants to live in a suburban home with two cars, grass in the front yard, two kids that are going to go to college, etc. etc. Strange as it may seem, some people in this world – and they are not a few – prefer to live simple lives, working only when they have to and perhaps as little as possible. “Work” is not such a great thing everywhere. Some people like to be what we call, lazy. They like to take a nap in a hammock after lunch.

So the idea of a world-wide middle class with a similar standard of living must be an illusion founded on misconceptions about people. There is great deal of harm done by “Improvers”, who are always thinking of ways to improve upon what people actually want if they are let alone.

Give them sound money, and let each work out his destiny, I say. A couple of years ago, a poll was taken to find out who are the happiest people in the world. Guess what? Mexico was Numero Uno!

Daily Bell: Any English books or articles you have written that you recommend?

Hugo Salinas-Price: I have not written any book in English – the readers I write for are Mexicans and I really have no business talking about the rest of the world, including the US. If I translate some of my articles into English, it is because I feel a few people may be interested in what is, after all, a unique project with no similarity to anything being proposed in the rest of the world.

You can find my articles in English at my website, www.plata.com.mx. Thank you so much, for taking an interest in my opinions!

Hugo Salinas-Price comes across as thoughtful and gracious soul – someone who truly has the good of his country in mind in many ways. His is certainly a life well-lived. He has built a national Mexican company from the bottom up, provided for his family and then spent his mature years engaged in a great struggle to introduce sound money into the economy of his native land. In fact, given the sensibleness of his endeavor (which grows closer to success in our opinion every year) you would think that his campaign to create a legal and circulating silver dollar in Mexico would already have borne fruit.

Given the shape of the Mexican economy and of paper money in general, Price’s monetary solution makes sense. Silver is the money of the people, just as gold has traditionally been the money of bankers and the wealthy. Silver has traded in a ratio with gold for millennia, and thus bi-metallism has been the monetary standard of choice for many cultures and countries. Historically, this is provable and seems reasonable to us here at the Bell, but such is the decrepitude of modern understanding of money that the Internet is assaulted a thousand times a day with elaborate monetary plans featuring all kinds of money stuff and strategies.

Essentially, money over the millennia has proven to have four characteristics:

(1) durability (value),

(2) divisibility (malleability),

(3) transportability, and

(4) noncounterfeitability (serviceability)

As free-market economist Murray Rothbard has famously pointed out, money evolved from a competition featuring different kinds of money stuff. Gold and silver (and to a lesser extent copper), precious metals often found together, were not appointed by a committee or king. The market itself determined the choice of money historically – and in fact money has manifested itself in other forms as well – beads, salt, sugar even large, carved rocks. But ultimately and over and over, the market itself has chosen gold and silver as the money of choice.

We have often observed in these modest pages that a gold (or silver) backed currency would prove most attractive if some country were to step forward and issue it. In fact, were Iceland or Greece or some other nation currently struggling with the ruinous ramifications of mercantilist fiat money to simply back the national currency with gold, many difficulties would be reduced or eliminated. (Of course, a country would need to find the gold to begin with, but that is a separate question.)

In the best of all worlds, of course, a country and a ruling class will not mandate the composition of money nor control its circulation. The market itself would decide on the composition of money, the kinds of banking that was demanded and even the level of fractionality with which money would circulate, if any. In fact, money really is a pretty simple issue once the market itself is re-involved. In a laissez-faire money economy, interest rates would fluctuate regionally, no doubt, the supply of money would vary from region to region and even inflation or deflation rates would be variable.

What we have today, of course, is much different. The powers-that-be have taken the various paraphernalia of money – its banks, bills and issuance – and gradually hollowed them out, offering instead an imitation that provides a historical representation but none of the control or value. Even government mints, which used to stamp gold and silver, today work overtime stamping what in the past would have been considered slugs – any kind of non-precious metals.

From our point of view it is only a matter of time until some nation, some group or even some region re-introduces currency backed by precious metals – or even, as Price hopes, beings to circulate the metal itself as a national money. If Price has his way, Mexico will be the first major modern country to do this. We wish him well in this important quest. When Mexico does begin to circulate its Libertad, others countries will soon follow. The benefits will be clear and fairly immediate.

A Pro-Free-Market Program for Economic Recovery

A Pro-Free-Market Program for Economic Recovery

by George Reisman, Ph.D.

[This talk was given at Economic Downturn: Cause and Cure (Mises Circle, Sponsored by Louis E. Carabini) Newport Beach, California, November 14, 2009.]

Good afternoon, ladies and gentlemen:

As you all know, we are in a severe economic downturn. The official unemployment rate now exceeds 10 percent and according to many observers is actually substantially higher. Within the last year or so, our financial system has been rocked to its foundations. The collapse of the housing bubble and the numerous defaults and bankruptcies connected with it brought down major financial institutions, such as Bear-Stearns, Lehman Brothers, and Merrill Lynch. It also brought down numerous small and medium-sized banks and threatened to bring down even such banking giants as Citigroup and Bank of America. The Dow Jones stock average fell from a high of 14,000 to about 6,500. Important retailers such as CompUSA, Circuit City, Mervyns, and Linens ‘N Things went under, as did countless small businesses throughout the country. Practically every shopping mall gives testimony to the severity of the downturn in the form of vacant stores.

The collapse of the housing bubble and the massive losses and mounting unemployment that have resulted from it have unleashed a veritable firestorm of hostility against capitalism, in the conviction that it is capitalism and its economic freedom that are responsible. It is now generally taken for granted that any solution for the downturn requires massive new government intervention, to curb, control, or abolish this or that aspect of capitalism and its alleged evil.

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