Good Moneys: 100%-Reserve Gold, Stock-Based Money
From July 1921 to July 1929 (8 years), politicians pushed us into Great Depression I by inflating money by 62%, From August 2008 through April 2022 (14 years), politicians pushed us into the current Great Depression II by inflating money by 303%.
Eventually we will get some politicians to do the right things, after they exhaust the alternatives.
Background: constitutional, error-cycle free, world asset %, value-adding,
100%‑reserve gold constitutionality and history of use, stock-based money
Fractional-Reserve Moneys Consume Value
Under fractional-reserve gold standards after the Constitution was ratified, politicians granted bankers an unconstitutional privilege to create and loan out money that wasn’t backed 100% by saved assets held in reserve.
Bankers would steadily create money, producing a boom. Producers would as a result make more unsustainable investments than usual, bringing a bust.
More people than usual wouldn’t pay back loans, or people would run to withdraw their savings from banks, and banks would fail. This would rapidly destroy some of the created money.
With less money available for the same products, people would lower the prices of products and labor. Money would buy more. But borrowers would earn less, and loan contracts didn’t adjust for this crisis deflation.
Politicians had let bankers inflate the money quantity, and this had changed the meaning of people’s loan contracts. Politicians then helped bankers by enforcing those loan contracts on borrowers. By allowing money inflation and then enforcing the changed loan contracts, politicians unduly deprived borrowers of property.
Fractional-reserve dollars let crony-socialist politicians spend more, give cronies more favors, and rake in more donations. Politicians’ booms bought votes, and politicians’ busts enlarged governments.
While fractional reserves brought deprivations, gold standards did bring helpful natural deflation.
Gold mining slowly inflated the quantity of gold. But unlike banker-created money, mined gold never got destroyed. Also, the population and its productivity increased faster. The net result was that gold’s purchasing power gradually increased.
People could save gold-backed money and later purchase more products. For many decades, this money increased in value 2.1% to 2.4% per year.
100%-Reserve Moneys Conserve Value
Going forward, congressmen and presidents could immediately require the Fed’s people to make the money quantity constant. The money quantity wouldn’t be increased by mining, but there would still be fractional reserves, so the money quantity would still change. And there would still be delays in collecting information and in making corrections, so the Fed’s people would still control the money’s quantity slowly, poorly, and unpredictably.
Instead, congressmen and presidents could immediately set the value of the dollar equivalent to a fixed weight of gold, determined by the price of gold at the time they make this change.
Or, state politicians could create gold moneys by offering gold warehousing and gold transaction processing. Transactional gold has been enacted in Arkansas, Florida, Louisiana,
Article from LewRockwell
LewRockwell.com is a libertarian website that publishes articles, essays, and blog posts advocating for minimal government, free markets, and individual liberty. The site was founded by Lew Rockwell, an American libertarian political commentator, activist, and former congressional staffer. The website often features content that is critical of mainstream politics, state intervention, and foreign policy, among other topics. It is a platform frequently used to disseminate Austrian economics, a school of economic thought that is popular among some libertarians.
