Almighty Dollar

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Available at Mises Institute Bookstore here »

Hans Sennholz was a great champion of the Austrian Theory of the Trade Cycle and also the Misesian view of money. He was a proponent of the gold standard, and this is his aggressive defense of Austrian theory against monetarism and supply-sideism. In fact, this is the most systematic Austrian criticism of the supply siders available. He uncloaks their free-market rhetoric to expose an inflationist core that is really Keynesian in its heritage.
The core of his argument concerns the centrality of the money question to the future of freedom, and here he is at his most eloquent.
Most striking for Austrians is a subtle change in Sennholz’s thinking on sound money itself. Instead of a centralized solution that would convert the very definition of the dollar—a solution he favors but regards as politically impossible—he proposes something very different and challenging: complete decontrol of laws concerning money production and use. With the repeal of coinage restrictions, legal tender laws, and decontrol of monetary contracts, he imagines new currencies circulating alongside the dollar.
The monograph is short and powerful—and his solution is worth taking a very careful look at. It might have more plausibility now than ever before.

Available at Mises Institute Bookstore here »

Hans Sennholz was a great champion of the Austrian Theory of the Trade Cycle and also the Misesian view of money. He was a proponent of the gold standard, and this is his aggressive defense of Austrian theory against monetarism and supply-sideism. In fact, this is the most systematic Austrian criticism of the supply siders available. He uncloaks their free-market rhetoric to expose an inflationist core that is really Keynesian in its heritage.

The core of his argument concerns the centrality of the money question to the future of freedom, and here he is at his most eloquent.

Most striking for Austrians is a subtle change in Sennholz’s thinking on sound money itself. Instead of a centralized solution that would convert the very definition of the dollar—a solution he favors but regards as politically impossible—he proposes something very different and challenging: complete decontrol of laws concerning money production and use. With the repeal of coinage restrictions, legal tender laws, and decontrol of monetary contracts, he imagines new currencies circulating alongside the dollar.

The monograph is short and powerful—and his solution is worth taking a very careful look at. It might have more plausibility now than ever before.

Filed under money economy economics politics book Austrian Economics Austrian School Mises Hans Sennholz dollar coinage restrictions legal tender laws currencies freedom liberty Libertarianism libertarian

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450 Reasons Gold Prices Will Continue to Rise

by Andy Hecht December 12, 2011

True Value of Paper Money Exposed

The value of a fiat currency – money that gets its value from government laws or regulations; i.e. money without intrinsic value – depends on the full faith and credit of the country that prints it.

Today, given the enormous levels of debt, the US and the European Union are printing more and more paper currency. The process of adding liquidity to the system has created a farce.

By any conventional accounting standards, these countries are so indebted that their paper currencies are worth only the value of the paper they are printed on – which is why gold has moved higher for a decade and why it will continue to appreciate.

It is not that the intrinsic value of gold has gone up – it is the intrinsic value of currency that has been unmasked.

Governments Now Realize the Value of Gold

Central banks no longer sell in the gold market. If there is any government out there that wishes to follow Gordon Brown’s example, there are scores of buyers that will gladly take the gold off their hands.

In fact in 2011, central banks and governments around the world purchased a staggering 450 tons of the yellow metal.

Indeed, 18% of all of the gold mined in 2011 found its way into central bank vaults. Central banks now realize that owning gold as a reserve asset beats low-yielding US dollars or debt-riddled euros any day.

The central bank of Korea, the world’s eighth largest holder of foreign reserves, bought 15 tons of gold in November after snapping up 25 tons in June and July.

And, Korea is not alone. In 2011, China, Russia, Kazakhstan, Colombia, Belarus and Mexico, among others, have all added to their gold reserves and have plenty of room to add more.

Demand is still growing

The pace with which central banks and government are buying is not slowing down.

Swiss banking and financial giant UBS two weeks ago noted: “Purchases of as much as 450 tons in 2011 may be repeated next year as Asian nations and emerging economies diversify their reserves.”

That’s at least 450 reasons why the price of gold will continue to climb.

The demand for gold from individuals and investors is also rising.

Chinese jewelry demand alone is around 13% higher year-on-year at some 131 tons.

China’s growing appetite for gold as a means of investment saw demand for gold bars and coins expand by 24% from year earlier levels to 60.2 tons. And, all this as the price of gold rose to new highs.

The Bottom Line

The demand for the shiny yellow metal continues unabated in the current global economic environment.

The bottom line is this: Gold is in demand and that promises to continue through the coming months and years – primarily because it remains the most stable asset and currency in the world.

Gold is the closest asset to a sure thing that exists today, and its price is nowhere near the top.

Filed under economics economy politics fiat currencies rising gold prices dollar euro central banks

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The Best Mistake You'll Ever Make

By Jeff Clark, BIG GOLD October 26, 2011

The following conversation took place between a friend’s son and I; he’s a bright but relatively young investor. He had purchased some gold based on some things I’d told his father. Shortly afterward, the price dropped hard. As you’ll see, he was not very happy with my advice and said so in an email to me. So I called him…

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Filed under economy economics investing dollar gold fiat money

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Yuan Gold Contracts a Step toward Reserve Currency

By: Dr. Jeffrey Lewis Posted Monday, 24 October 2011

On Monday, the first gold contracts denominated in the Chinese Renminbi (also known informally as “yuan”) came to the Hong Kong market.  Analysts have been quick to note the implications of a yuan-denominated contract, realizing that the new contract could drive nearly three times as much demand as the dollar-denominated contract.

Looking at the yuan product from the macro-view, a move into gold is about more than just gold—it’s about reserve currency status. 

Dollar’s Monopoly

The US Dollar has a monopoly as the world’s reserve currency.  The size and scope of the US economy and financial markets, combined with the relative stability of the political climate, made the US dollar a preferred currency for international trade. 

However, the reason most cite for dollar dominance isn’t the United States’ role in international commerce, but its monopoly on a single product—oil.  In an agreement with Saudi Arabia, the United States effectively tied the global oil market to the US dollar.  No other currencies could be used to purchase “black gold,” the driver of modern industry.

Signs of Defiance

As China grows, it naturally wants to extend its reach as an economic powerhouse. Recently, in a move that rattled those who see the dollar as the only reserve currency, China agreed to trade oil and energy products with Russia in their own currencies.  This should have been seen as a warning sign, a move that would lead to new policies to make the Renminbi a global currency for commerce.

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Filed under economy economics politics'news dollar reserve currency yuan Chinese Renminbi China oil Saudi Arabia gold

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The Real Contagion Risk

By Chris Martenson Posted Monday, 24 October 2011

Why the US Should Care About Europe

At the very core of the global nuclear money reactor are US Treasurys and the dollar. If the dollar’s role as the world’s reserve currency wanes or even collapses, then the scope and pace of the likely disruptions will be enormous. Of course, we’ll be glad to have as much forewarning as possible.

Accordingly, it is my belief that if the contagion spreads from Greece to Portugal (or Italy or Spain), and then to the big banks of France and Germany in such a way that they fail, then rather than strengthening the dollar’s role (as nearly everyone expects), we should reserve some concern for the idea that the contagion will instead jump the pond and chew its way through the US financial superstructure.

While I am expecting an initial strengthening of the dollar in response to a euro decline, I believe this will only be a temporary condition.

The predicament is that the fiscal condition of the US is just as bad as anywhere, and we’d do well to ignore the idea, widely promulgated in the popular press, that the US is in relatively better shape than some other countries. ‘Relatively’ is a funny word. In this case, it’s kind of meaningless, as all the contestants in this horse race are likely destined for the glue factory, no matter how well they place. 

While there are certain to be a lot of false starts and unpredictable twists and turns along the way, eventually the precarious fiscal situation of the US will reach a critical mass of recognition. Before that date, the US will be perceived as a bastion of financial safety, and afterwards everyone will wonder how anyone could have really held that view.

A good recent example of how swiftly sovereign fortunes can change: One day, everything was fine in Greece, which enjoyed paying interest rates on its national debt that were a few skinny basis points (hundredths of a percent) above Germany’s. A few short months later, Greece was paying over 150% interest on its one-year paper. 

What I am asking is this: What happens when the same sweep of recognition visits the US Treasury markets? Is such a turn of events even possible or thinkable?  Here’s one scenario.

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Filed under economy economics politics US Treasurys dollar contagion world's reserve currency eurozone crisis

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Dollar Drops to Post World War II Low Against Yen Post World War II Low Against Yen

Breakingviews: France can't afford major split with Germany

Friday, 21 Oct 2011 

The dollar dropped to a post-World War II low against the yen and fell versus most major currencies on speculation Europe is moving closer to resolving its debt crisis and the Federal Reserve may seek further monetary easing.

The euro advanced for a fourth day against the dollar, in the longest stretch of gains since July, before two European summits over the next five days. South Africa’s rand and Australia’s dollar rallied as stocks and commodities increased, boosting demand for higher-yielding assets. The dollar remained lower versus the yen as Fed Vice Chairman Janet Yellen said new purchases of securities may be appropriate.

“Clearly the dollar is weaker against the euro on speculation that there is going to be a happy ending to the debt crisis,” said Greg Salvaggio, senior vice president of capital markets at the currency trader Tempus Consulting Inc. in Washington. “There’s a risk-on feeling in the market.”

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"There’s a sucker born every minute"

Filed under economy economics politics financial news dollar yen euro Federal Reserve eurozone crisis debt crisis quantitative easing QE3

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The Moral Unraveling of the EU, Bailouts and Central Banking

from The Daily Bell Saturday, October 15, 2011 – by Anthony Wile

Slovakia has now approved the European debt-crisis bailout fund, but the problems Europe is experiencing are similar to those faced by America in the grip of the Fed’s immense bailouts of the past two years.

Increasingly, these are seen as morally repugnant by citizens throughout the West. And this has significant consequences that the mainstream press declines to report.

Dominant social themes work by omission as well as commission; in this column, I want to re-examine potential ramifications. I’ve done it before, but I think it’s worth repeating. Not enough commentators, even in the alternative media, point them out in my humble opinion.

Money continues to flood Western regimes and financial institutions with billions and billions that they don’t deserve and cannot properly apply. Perhaps there is no alternative but to “kick the can down the road.” On the other hand, perhaps the bailouts are part of a wider elite destabilization effort, one intended to generate chaos and misery that will pave the way for global governance and maybe a new world currency. This is the view of the more conspiratorially-minded among the alternative media.

For whatever reasons, the bailouts, against all logic, continue apace and are being increasingly resisted … not merely for their Draconian impacts but because people are using technology to become more informed. This bailout saga, therefore, has been unusual, not only for the incalculable wealth that’s been extended but also because it’s played out in front of millions.

The ramifications continue to be felt in my view. The push-back began in the US with TARP and then continued with revelation of US$16 trillion-plus (probably more) in short-term loans extended by the US Federal Reserve to financial institutions – not just in America but around the world.

Now US Congressman Ron Paul is conducting the Federal Reserve’s first “audit.” Ben Bernanke speaks, but his pronouncements have nowhere near the power or authority of his predecessor Alan GreenspanOccupy Wall Streetand alternative journo Alex Jones are both holding organized protests outside Fed buildings. In Southern Europe, protests and riots (Greece) rise wherever the EU and its bankers attempt to impose “austerity.”

The Internet has allowed people to see – finally – exactly what’s going on. Prior to the Internet, the controlled mainstream news would have explained in unison that the Fed “made massive adjustments to the global financial fabric to ensure that systemic collapse was mitigated …” or employed other nonsensical euphemisms. These sorts of non-explanations would have been repeated ad nauseum.

But in the era of the Internet, such gobbledygook has been effectively negated by literally millions of articles (and thousands of videos) explaining what central banking really is – monetary price fixing – and how central bankers “print money from nothing” to advantage their cronies at the expense of everyone else.

The system survived because it appeared so incomprehensible that it was beyond criticism. Not anymore. People around the world “get it” and the anger is breaching even the indolence of the political class. Eventually, if certain fundamental knowledge becomes widespread enough, the elites may have to take a “step back” as we have predicted they might. Resistance is spreading.

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Filed under economy economics politics central banks Federal Reserve the Fed End the Fed ECB BOJ inflation deflation money printing crime news euro dollar gold bailouts Internet occupy Occupy Wall Street occupytheFed Bernanke Ron Paul for President

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polyslime:

Who is controlling whom? Governments controlling the economy? Or Central Banks controlling the government? It seems in the final analysis to be a hopeless case of a dog chasing its own tail. But it’s the common man who’s sure to be bitten.
parapolitical:

ECB Orders to Italian Government Revealed
An August letter from the European Central Bank to the government of Italy was leaked to the Italian newspaper Corriere Della Sera, which published the document in today’s edition.
The letter, marked “Strictly Confidential”, contains a list of orders the Berlusconi government is to carry-out, including areas of spending cuts and methods of pension reform. It even directs adoption of specific amendments to Italian state finance statutes: 

“An automatic deficit reducing clause should be introduced stating that  any slippages from deficit targets will be automatically compensated  through horizontal cuts on discretionary expenditures.”

polyslime:

Who is controlling whom? Governments controlling the economy? Or Central Banks controlling the government? It seems in the final analysis to be a hopeless case of a dog chasing its own tail. But it’s the common man who’s sure to be bitten.

parapolitical:

ECB Orders to Italian Government Revealed

An August letter from the European Central Bank to the government of Italy was leaked to the Italian newspaper Corriere Della Sera, which published the document in today’s edition.

The letter, marked “Strictly Confidential”, contains a list of orders the Berlusconi government is to carry-out, including areas of spending cuts and methods of pension reform. It even directs adoption of specific amendments to Italian state finance statutes: 

“An automatic deficit reducing clause should be introduced stating that any slippages from deficit targets will be automatically compensated through horizontal cuts on discretionary expenditures.”

(Source: parapolitical)

Filed under politics economics economy eurozone eurozone crisis euro dollar US dollar central banks ECB Federal Reserve End the Fed Italy Berlusconi central planning