“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.” – Alan Greenspan
I know, it sounds odd to hear those words from Greenspan. He wasn’t always an inflationista. He once believed in sound money. I guess being Fed chairman (employee of Goldman Sachs) can change your viewpoint.
Before getting to my main point, I want to throw some scriptures out there for you:
- “The Lord abhors dishonest scales, but accurate weights are his delight.” – Prov 11:1
- “Differing weights and differing measures—the Lord detests them both.” – Prov 20:10
- “Do not use dishonest standards when measuring length, weight or quantity. Use honest scales and honest weights, an honest ephah and an honest hin. I am the Lord your God, who brought you out of Egypt.” – Lev 19:35-36
- “Am I still to forget, O wicked house, your ill-gotten treasures and the short ephah,which is accursed?Shall I acquit a man with dishonest scales, with a bag of false weights?Her rich men are violent; her people are liars and their tongues speak deceitfully.” – Micah 6:10-12
I’ve said time and again that the fiat currency system represents unjust weights and standards. Historically, false weights were used by the wealthy to cheat the poor – and the fiat currency system is no different. It is the mechanism by which the super wealthy, the banking class, robs the poor – a massive transfer of wealth from the poor to the rich.
The mechanism is simple. Money must be a store of value, otherwise it is not money at all. You store your excess production as money (dollars, here in America) to be spent latter. In a fiat currency system, the central bank can simply print up more dollars, more “stored value” at will. If they distributed them in proportion to the outstanding stored value (dollars) then there would be no problem – but they don’t. Instead the print them up and hand them out to the banking class, which then “launders” them by lending them into circulation.
Of course when the central bank invents new money out of thin air, the stored value of my money is reduced, which usually manifests itself as “price inflation” – but not necessarily.
Over the years we have heard some impressive rhetorical gymnastics to defend such a system. Keynesians have argued that inflating the money supply leads to economic prosperity. Goldman Sachs CEO Larry Blankfein has argued that bankers are simply doing “god’s work” … I suppose so, depending on who your “god” is. Bank during the TARP bailout we saw the government (that is, the taxpayers) give money to the banks so the banks would lend it to the taxpayers … again, for the good of us all.
Of late I’ve seen a different argument made time and again regarding the need to “debase” the currency in the international monetary system: exports. The basic contention is that a weakened local currency will improve export prospects for the home country by making their products cheaper on the international scene.
This is crap. Remember, money is simply stored value, stored excess production. The very notion that the citizens of a country will be better off if they trade more of their stored value for less of the stored value of another country (weakening local currency) is absurd. Of course the people won’t be better off – but the wealthy class will. It is always those with first access to the newly printed money that make out like bandits.
And yet, the economists continually push this line of thinking. They seem to believe (and they’re economists, so why wouldn’t they?) that printing money does in fact produce something from nothing. Oh well. Little by little, bit by bit …