Sunday, April 11, 2004


Don't you think it is a good idea to have a post on taxes and money as a commodity, on the Tax Freedom Day? It is a positive sign that this day has come earlier this year than last year, in fact it is hasn't been as early as this date since 1967. George W. Bush should get credit for this. It's time for him to pay some attention to the monetary policy.

A person with the username "Joe Enterprise" has written an entry on EGO forum about today's economical situation and the power of the Federal Reserve, and his solution to the problem is something called "American Liberty Dollars." I don't know anything about this specific medium of exchange, but maybe my post could spark a discussion on why the system with fiat money has been generally accepted around the world, and suggestions on how we could return to an objective way of exchange, such as the gold standard.

Here is a clear statement from the Warsaw Business Journal:

"Since the Eighth Century in China, hundreds of fiat-money monetary systems have been attempted and have failed 100 percent of the time. The main reason they fail is because whenever bankers and/or politicians are left in charge of the integrity of fiat money, the temptation to manipulate that money has been so overwhelming that none of them has been able to resist it. In every case, they have driven the purchasing power of the fiat money down to its cost of production, which is nearly zero.

Until 1971 there was some protection as the U.S. dollar was pegged to the price of gold and all other currencies derived their value from it. Once this was abandoned under Nixon, the Fed became the lender of last resort and began to control the world economy by the extension of credit." (Zbigniew Piekarski, 03/15/04.)

I wonder if Alan Greenspan has totally blanked-out what he wrote in 1966... Here is an excerpt from his essay, Gold And Economic Freedom, published in Ayn Rand's book, Capitalism: The Unknown Ideal:

"The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which - through a complex series of steps - the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold." [Paperback edition, page 101.]

Don Luskin is getting some facts straighten out about the role of the Federal Reserve and the chairman and his thoughts, in his article, The FED, Alan Greenspan, and Ayn Rand. If you want to get some nuggets of valuable information on the so-called "gold bugs", read Mark Da Cunha's interview with Richard Salsman. For some additional comments by Mr. Salsman, read Robert W. Tracinski's article, The economics of war.

If you are interested in learning more about the banking system and economics, I recommend you to read the following books:

Breaking The Banks: Central Banking Problems And Free Banking Solutions and Gold And Liberty by Richard Salsman. You could purchase the books from the American Institute for Economic Research.

CRA$HMAKER - A Federal Affaire by Victor Sperandeo. I met "trader Vic" on my first visit to America in 1996. You could read an review of the book in Freemarket Gold & Money Report.

Principles of Economics by Carl Menger.

I will end this post with an excerpt from Carl Menger's On the Origins of Money:

"Finally the precious metals, in consequence of the peculiarity of their colour, their ring, and partly also their specific gravity, are with some practice not difficult to recognise, and through their taking a durable stamp can be easily controlled as to quality and weight; this too has materially contributed to raise their saleableness and to forward the adoption and diffusion of them as money." (Economic Journal, volume 2, (1892) p. 239-55. Translated by C.A. Foley.)

I wonder if Harvey Olson of "Bad Money" has a "greenback" with the words "in goLd we trust" in his "Graffiti Currency" collection...