Banking has become so inter-twined with daily life, that it is impossible to imagine a world without banks. And still, we better do! Unexpectedly and out of nowhere systemic cracks have made their appearance on the world's financial scene. Wide spread rot, corruption and outright fraud is coming out into the open. Mega businesses and whole countries are defaulting. The halos of integrity of the elite of finance are fading. It is not a question of will the banks and their fiat casino survive, but when will the whole kit and caboodle collapse?
It will be impossible to save the situation by introducing corrective measures. The Merchants of Debt have too many privileges and entitlements. Not over their dead body will the Banker cede them. But that is exactly where it all might end.
Banking has totally uprooted society. Once flourishing enterprises have been bundled into inefficient conglomerates, small grass roots business killed, people smothered in debt, family life torn apart, governments inflated out of proportion and the Developing World imprisoned in a debt labyrinth without exit.
It is not only a material question and of re-instating sound money. It is the grave social and psychological damage which has been done to morals and ethics, which has brought cynicism, loss of faith, nihilism and despondency. Heart and soul of society have been destroyed and the people reduced to a manipulated, amorphous mass.
Nothing could describe the tragedy better than an e-mail received from the Developing World in response to "the Wealth Transfer Machine":
"For the last 30 years we have been watching helplessly how nations such as ours, are gradually drowning in the oceans of debts. Not only we are at the mercy of these banks, but all our physical resources including human resource has vanished from our country. Instead we see these resources safely stacked in the developed world, providing benefits to those who already have everything. Our country has become poorer. Such is the plight that you wont find good teachers, good lawyers, good mechanics, good doctors, good engineers in our country. Our pride is gone, our self esteem is gone, our sovereignty is gone. We are dead. - F.W."
The SE Asia crisis, the WTO and IMF protests, the Tequila Crisis, the Argentinean crisis, the LTCM and the recent Enron scandal are only the early symptoms of where the world is heading. Under the surface the situation is much worse. It is boiling! The churning market and the desperate liquidity creation is proof of it. So fast is the global fiat money system deflating, taking the economies down with it, that without the opposite, ever accelerating, fiat creation, liquidity would dry up overnight, the financial markets collapse, and daily life grind to a halt.
Dollar monetary inflation or deflation depend solely on Greenspan pumping faster or slower than the economy is shrinking. And as both, the survival of the government and the banks, are dependent on the financial carousel keeping on turning, maximum liquidity and a strong dollar are required. The bets are thus on Greenspan inflating faster.
Greenspan's efforts will be to no avail, the rot has advanced too far. History will take its course, correcting painfully all what man planned in evil spirit. History has always seen to it that, when the tide turns, wealth will gravitate from the lofty highs back down to grass roots. And if not returning freely, it will be taken back there by force.
Let the "big apple" rot. Let the ones responsible hang themselves with their own rope. With pleasure, we can assist them in revealing their blatant lies and crookeries.
But let us be positive. Let us start planning from today for what will be coming after. For the day when the old, crooked system will be in its final death throes, when the world will feel destitute, when people be desperately looking for new anchors. That will be the time when new ideas will find a fertile soil and gold and silver will shine again.
Corrections will not save the present financial order. I am also convinced that the heterogeneous global political structure, bullied by a few elephantine super powers, is not far from disintegration either.
I am longing for a clean, new beginning, a fresh sheet in the history of mankind, the sooner the better, and that is what this essay is all about.
And to get off to a clean start the first thing to do is to put all the vagaries of the floating, drifting and constantly shifting fiat currencies behind - and resurrect the proven solid anchors of sound money, gold and silver, to which everything and everybody can relate.
I envisage not so much the creation of a gold or silver standard, but of gold and silver proper circulating automatically and independently side by side as money, without governmental or institutional involvement. There will have to be rules for the game however.
To function properly, free and independent, gold and silver have to be part of a "system", an ideology. The dollar is part of the American banking and political system, the euro part of the European Union system. Currencies only work when linked to rules, regulations, laws and people supporting it. If a gold and/or silver standard were resurrected inside the present American, European or Yen frame-work, then the gold and the silver would soon again become the prisoner of politics and greed. We have to get away from political interference. And although not a geographically bound entity, a cyberspace organization on the Internet could well serve as a free and practical base to start off with honest money.
Let us provisionally call such envisaged cyberspace organization "Grass Roots". Its task would be to promote gold and silver as money and to draft the necessary accompanying rules and regulations. The same global organization once established could later on well serve further aims.
For our currency to be successful, all temptations and chances to cheat and corrupt must be eliminated as far as possible. This entails keeping the currency and its accompanying finance and markets as simple, as automatic, as transparent as possible. Seeing to it that no single entity can take control, and that there is no concentration of capital, no leveraging, pyramiding, or spider webbing of interests in anonymity.
Money has to circulate passively, and auxiliary to economic needs. Money should always be a servant and facilitator to the economy and never the other way around as has been the fatal mistake of the last two centuries. Neither should there ever be interference with its valuation. The markets should take care of that. The consistency of the value of money is the anchor everything turns around. The moment value is tampered and interfered with, everything starts to drift.
To stay free of interference and political pressure Grass Roots should avoid having its seat of residence in a physical country. Grass Roots must establish its roots, not only off-shore, but off-shore in Cyberspace. It should grow from private initiative, and beware of becoming a proprietary enterprise.
The idea to use a cyber residence has its further reasons. Not only has global finance come under scrutiny, but the whole concept of national states and their United Nations is not working. The world is not any longer what it used to be. A world where there are still open spaces for expansion is far different from a world which has become a closed house. Today there is no more room for political expansion except through war. The Earth has become like a liquid, which under pressure is suddenly turning solid. It is metamorphosing. We cannot have a few big bullies running around and telling all the smaller nations what to do. Big Bullies have become vulnerable. September the eleventh has amply demonstrated this. Superpowers have become anachronisms, ungovernable and uncontrollable. A few thugs can run away with them!
Small is strong again and big becoming weaker. We are entering a period of fragmentation, in business, finance, social structures and politics. A world under pressure is bound to re-crystallize into much smaller and more efficient, regional entities and City States. Mini-states could form the ideal support for Grass Roots and global precious metal currencies.
What we are experiencing is much more than just a financial crisis . It is even more than a crisis of Western civilization. It is the crisis of human cohabitation on a planet suddenly filled to the brim with people. It is in this light that present and future problems will have to be viewed and solved. Changes are going to be major and are going to affect every single aspect of human life. Mankind is suddenly being confronted with the most important question ever since his existence: is humanity going the way of an ant society or is there still a chance for man to live and prosper as an individual? Big Brother has already made his entry. Can we still get rid of him?
Many years will pass before the Great Upheaval will have worked itself out. The whole of the twenty-first century or more might be involved. The financial crisis, the social and cultural crisis are all part of the same Great Upheaval we are entering. Everything has grown so inter-twined. Single solutions for single problems will not hold on their own. Each single problem has to be evaluated and solved in the context of the global changes taking place. Gold and silver no exception.
If gold or silver were re-introduced as a standard without convertibility, it would, in effect, mean that gold and silver proper would not circulate and would stay incarcerated and concentrated in bulk in a few selected vaults, subjected to the whims of the Merchants of Debt. The only plus side of a standard would be the "apparent" discipline by a mandatory cover of gold or silver for the issue of paper currency. "Apparent" in the sense that opportunity for cheating would still be there. Only if and when the currency under a gold standard is freely convertible into bullion, only then can gold and silver flow back into the grass roots economy and circulate freely.
Plenty of bullion will be needed to launch proper gold and silver currencies. Bullion prices will come under upward pressure. The lopsided ownership of precious metals is a major problem. 100,000 tonnes of the world's gold hoard of an estimated 135,000 tonnes is, in all probability, held by the private sector, most of it in illiquid and non-commercial form. Of the Central Banks' hoard of 38,000 tonnes held fifty years ago, less than 20,000 tonnes is all that may remain after years of leasing, if that much! That still leaves 15,000 tonnes are unaccounted for.
I beseech the reader to look back at the first pages of
"Gold in Macro Perspective"
www.gold-eagle.com/editorials_99/schicht010399.html
It is about the ingrained interest of the Merchants of Debt in gold, silver and mining for over 200 years. They should know. They are the ones who handle fiat paper! When checking up on exploration or mining ventures, how often does it not happen that we find participation and finance provided by the Merchants of Debt? And having such broad interests in precious metals, should not it be fitting for them also to possess a fair hoard of bullion proper? With the ample profits made with their Wealth Transfer Machine and the gold leasing scheme, what means 15,000 tonnes in their vaults? Considering all the gold they will need for their planned One World currency, it does not sound that much. 15,000 tonnes are not exaggerated relative to the immense total wealth the Merchants of Debt have acquired over the years. Although a small part of it might lately have been used to keep the lid on the price of gold, plenty should still remain. Time will tell.
Should the Merchants of Debt, who already have made exorbitant profits by manipulating the prices of gold and silver down, now also be allowed to get a free ride the way up? As the situation stands at present, it won't make the slightest bit of difference in what kind of new dress gold and silver will re-appear, or who launches gold or silver currencies, the Merchants of Debt are bound to profit most, thanks to their hoard.
A free world needs a currency with intrinsic value not controlled by anybody. To guarantee such freedom an organization like Grass Roots is a must. The same way as the Merchants of Debt have legalized their ascent step by step, so should Grass Roots, once established, de-legalize their perverted privileges. It does not matter that Grass Roots will have to start out with but a cyber residence not recognized by the establishment. A Grass Roots, well set up and managed, will attract followers, grow and expand its field of influence world wide, and with its ascent the applicability and impact of its laws and regulations will expand. It is effective territory which mirrors the power of a law.
Let me put the concept of Grass Roots in a nutshell:
Only if man were to take destiny in his own hands, could there still be a chance to alleviate and shorten the suffering by expediting the transition to a new era.
To achieve this, two initial actions should be taken:
The Mini-states will have the freedom to legislate and govern within their own borders as suits them, as long as their laws will conform to basic human values. 6000 Mini-states should give the world a smoother ride than 181 national states subject to the whims of a few bullies. Mini-states will have to compete to survive. To attract business, money and the right people, they will have to be efficient and offer value!
Once charters have been drafted, the People's and the Mini-state Assemblies will join in a working relationship. Lots of things they could do together. Elect a Higher Council and, cutting through the present Babylonian confusion of thousands of national laws, which only feed the lawyers, draft a simple global code of law covering international disputes. Create an administrative umbrella organization. Promote the free and independent circulation of precious metal currencies. Correct the damages the financial piracy of the last two centuries has caused. Protect people from the vagaries of the State and the banks. Defend the freedom of the Internet.
Grass Roots purpose is to free the individual from his bondage to the oppressive State, to give him a new sense of belonging and a solid anchor of moral and ethics, to free the individual from financial slavery and monetary mismanagement by creating and promoting the circulation of gold and silver as global free flowing means-of-exchange and store of value for all.
In this context Grass Roots will strive to:
Outlaw anonymity in all affairs other than strictly personal and private.
At first the above might look as if putting the world back into the stone age, but not so if one includes all the opportunities for new kinds of businesses resulting from the ensuing fragmentation and not when one includes the good riddance of the hoards of parasites sucking on society. That includes most of banking, finance companies, funds, lawyers, brokers, credit rating companies, insurance, investment advisors, debt collecting agencies, credit card issuers, and all further parasites. Tremendous savings for society and what an alleviation will it bring!
Instead of supporting elephantine industrial complexes which process from the raw material to the end product, new regulations and laws will force inefficient enterprises to condense into manifolds of independent, smaller, efficient, specialized entities. It would make it possible for even small sized companies to offer top consumer products, assembling from a choice of components available from many sources.
With no more future markets we might see the birth of commodity investment companies buying directly for cash from the producers, holding on till the right moment to put them onto the market, where only cash deals will be permitted.
By abolishing anonymity and by prohibiting companies to have direct participation in other companies, the pyramidal concentration of capital will become a thing of the past.
Small specialized enterprises and small States are much more adaptable, elastic and efficient and will give the world a much smoother ride. Structural disequilibria will show up quickly and adjustment will come about easily.
The abolition of all forms of loans and credit and the payment of interest thereon is a must for a society to be truly free. More people are today enslaved in chains of debt than ever before in chains of iron. Without loans, financial needs, short or long term, can either be covered through emission of share certificates, where partners enjoy equal rights instead of loan sharks having preference over share holders. We could see a new class of finance companies, specialized in taking share participation on a temporary basis, to sell these later, once their investment will have attributed to profit growth.
We can do without the "gray-zones" of overlapping futures, derivatives, interest rates and ownership, were the parasites are free to operate in anonymity. The world needs clear definitions, sharp defined borders. The world needs openness! And the world needs honest money: gold and silver in their own right and not only based on gold and silver!
Debts arise from usury and Grass Roots does not recognize usury. And neither does Grass Roots recognize phantom debts originating from offhand book entries. To correct the many years of financial exploitation Grass Roots proposes to rescind on global scale all outstanding private and public debt and the accompanying interest obligations. And in the same spirit, to cede the ownership of residential homes and small business locations to their occupants. In short: nobody should owe anybody anything any more. Like physical slavery was abolished so should financial slavery.
Considering that, on a global scale, interest payments on national debt amount to over 35% of total State expenditures, the tax burden carried by the citizen could be reduced in proportion.
Adding hereto the interest and bank charges the average individual and business pays, the picture of what financial parasitism is extracting from the economies becomes clear.
Global Debt cancellation? Sounds radical? Could be, but it would be preferable by far to history taking its course, correcting the follies and greed of a few men with bloody revolutions, endless wars, migrations and chaos.
With the evils of the past behind us, gold and silver could reclaim their rightful places. With the right set-up, there will not even be a need for an issuing authority. But standardization is a must. Denominations will be in units of weight.
With gold under U$ 3000/oz the initial requirements for a global precious metal currency could be covered, for the higher denominations, by standardized gold coins and, for the lesser denominations, by wallet friendly gold bills composed of standardized gold leaf units embedded in plastic and by silver coinage circulating in tandem.
(For technical details, please see footnote below.)
However, should demand outrun supply and the price of gold pushed above the U$ 3000/oz, small gold denominations would become a real problem. Silver would then have to fill the gap. Gold is the rich man's money and silver the poor man's money. And as the poor far outnumber the rich, silver might fast outgrow gold in monetary importance. Whatever, two anchors will do a better job to hold the world aligned. A silver anchor at the prow and a golden anchor at the stern.
People will go for gold and silver money when they can trust it. That means, once verification has been made easy. Verification is the crux of the matter for the ultimate success of gold and silver proper as global money.
There are various ways and means to identify and qualify metals. X- to gamma- rays, reflectivity, acoustics, specific gravity, magnetic properties, electrical and thermal conductivity and so on. The same way as there are at present hundreds of thousands of cash dispenser machines all over the world, so could public gold and silver verifiers be designed to check on the purity, quality and authenticity of the gold and silver money. I do not think modern technology would have a problem in bringing even small palm verifiers onto the market for standardized gold and silver money.
People, even the poor, must be able to see it and feel it and identify it. Real value in the hand is psychologically so different from notes and electronic units even when the latter may be 100% guaranteed. It is the real McCoy, not gold IOUs, not paper backed by a gold standard, not digits, nothing of promises and deceit of bankers and politicians fooling around. Although the concept is right, also E-gold is only a promise and underlies the same risk of becoming concentrated in a few hands. E-gold, in a secondary function, however, will be very much needed to facilitate the geographical circulation of gold and silver. Where gold or silver cash money will serve for on the spot transactions, E gold and silver are needed for transactions over distance. E facilities could be combined with Verifiers. The gold or silver required for a transaction or transfer could either directly be deposited in cash or charged to an established E-account before being transferred to the recipient's E-account. Verifiers could also serve to exchange shabby gold foil notes for fresh ones.
Standardized, automated verifier, deposit and transfer machines will have a pivotal role in the circulation of intrinsic gold and silver currencies. With such machines and no more loan business, who would still need banks? Anybody will be able to bring intrinsic gold or silver currency into circulation, as long as it fits the standards.
Imagine a world with gold and silver proper circulating without interest and without being arbitrary bound to one another. The relative value of silver against gold would keep adjusting automatically without interference. People would be free to think and save either in gold or in silver, both keeping one another in balance. Tomorrow's savings would still be today's savings. With fiat money out of the way, there would no longer be a need to seek protection in manipulated paper certificates which in the end are only good for feeding sharks and parasites.
People need an anchor. The personal possession of real gold and silver. It does not matter how little, it gives a feeling of achievement, of self-esteem, and a basis to build on. Precious metals are ego builders, promoters of individuality, fostering feelings of independence, of freedom. It is the best defense against Big Brother and the world turning into a drifting formless jelly of amorphous masses. Give the people back their anchors, their values and we will see a different world.
Properly set up, Grass Roots and its gold and silver money will win, not through force, but by being right. Grass Roots needs supporters and promoters from all sides of society. Grass Roots will need a cyber home for initial discussions. Who will offer Grass Roots the initial shelter? Who dares to take the initiative? Do come forward, help forge the future! It will need brains, dedication and above all courage. I am in my seventies and too old and too tied down with other problems. But I am available to help with input and ideas.
O, yes, one last item: Grass Roots should be designed to stand financially on its own feet, but with the condition that its bookkeeping will be run on open web pages.
This essay will be my last one for the next four months or so. As I will be traveling and changing residence for the umpteenth time it will not be possible to reach me on e-mail during that period. Please be patient and wait till I return with another essay in a few month time. Lots of things might have happened by then, and hopefully Grass Roots will be up and alive on the Internet by that time!
Hans Schicht
The digital copyrights for this essay are waived as long as the author and GOLD-EAGLE are mentioned (providing link http://www.gold-eagle.com ).
NB
Values and weights will have to be in conformity with the needs of global usage and computerization. Troy ounces and pounds are out and the metric system in, which is much more practical, especially when dealing in smaller denominations. To arrive at monetary values (weights) fit for practical use, the following criteria for gold will have to be taken into account:
There are over 6 billion people in the world and approximately 135,000 tons of gold. Of these 135,000 tons let us say that 60,000 tons could be made available for monetary use. This would come to 10 grams gold per person, which taken at a prospective value of US 3,000.- per ounce, would roughly amount to an average gold cash value of U$ 1,000.- per person for his 10 grams or 1/3oz.
US$1,000 in gold, as means of exchange, per person is not too far out considering that 90% of the world population is poor. But once people start saving in the form of gold, the prospective US$3,000 value per ounce will fall far short of covering the total monetary requirements.
Taking the present denominations of the US dollar as an example and converting them into weights of gold at the prospective U$ 3,000 per ounce,
| a US$ 100.- bill will come to | 1.0 gram of gold or 1/30oz |
| a US$ 20.- bill | 0.2 |
| A US$ 10.- bill | 0.1 |
| All the way to a nickel | 0.0005 gr., for example represented by a fine gold leaf about 1/7th sq. inch, 0,15 cm2 equivalent to a finest gold wire, a length of about 5 ft or 1.5 meters |
With the prospective price of gold at U$ 3.000/oz, everything above a US$ 300.- value, or 3 grams gold, could in practice circulate as coinage. Under 3 grams all the way down to 0.1 grams gold leaf (foil) standard strips embedded in plastic as bills would be more practical. Gold leaf could be sized into different values. For instance 0.1 grams of gold, the equivalent of a US$ 10.- bill, could be cut and sized into 10 strips of 0.01 gram each.
As has been suggested in a letter to Adam Hamilton, holograms could be used for the security of wallet friendly precious metal money. Holograms, at the same time, could be designed to serve advertising purposes to cover the costs.
Under 0.1 gram, leaf bills will become more difficult. Fine gold wires could then be used, coiled flat into a plastic bill or printed onto base metal coinage, subsequently plastified for protection. An ultimate possibility for mini gold denominations could be embedding standardized grains in a matrix. We have to leave it to modern technology to come up with the best solutions fitting standards for even the smallest denominations required.
Hans Schicht
hansyebo@wanadoo.es