Universal Theory Of Money Explains
How Derivatives Compete With Gold
Shelby Moore
Both Keynes and von Mises were wrong on key aspects of theory of money (von Mises closer to correct). Dr. Fekete seems to have it all figured out. When Dr. Fekete writes "interest rate", I think he means generally "opportunity cost" of investment-- which can include usury interest rate (debt servitude) but is general to return on any investment. It important to understand that when former US President Andrew Jackson ruled that all real estate loans must be in gold, then the speculative bubble ended, as banks were unwilling to loan gold for speculation. So gold standards inherently limit usury (debt slavery) form of "interest rate", and cause real investment instead.
Usury financial systems lead to misallocation, dislocation, and massive
suffering, and usury financial systems are impossible on a 100% gold
standard, which is why (Central) banks hate gold standards and do their
best to mis-educate the populace. Banks don't want to be gold warehousers
earning a % fee of the economy, when they think they can concentrate
ownership of the entire world via concentrated control (Central Banking)
of paper debt financial systems. And note, if the warehouse % fee is
greater than the increase in supply of gold, then the bankers in aggregate
end up owning the entire world on a gold standard eventually, except not
concentrated power due to the diversity of free competition for
warehousing services (bullion banking) on a 100% gold standard.
www.financialsense.com/editorials/fekete/2007/0307.html
Reason base metals can never be money, is they don't have the
constant marginal utility of monetary metals. Von Mises did not agree
that monetary metals have constant marginal utility. And Keynes tried to
relate interest rate (opportunity cost) to commodities with declining
marginal utility:
"...The case is different for non-monetary commodities. Here the
stock-to-flows ratio is a small fraction. The reason is declining marginal
utility in contrast with monetary metals with near-constant marginal
utility. Von Mises argues that constant marginal utility is contradictory
because it implies infinite demand. He is plainly in the wrong. He ignores
the nexus between gold and interest. In more details, interest acts as
obstruction to gold hoarding. Demand for non-monetary commodities is
limited by declining marginal utility. By contrast, demand for monetary
commodities can indeed become arbitrarily large, but only if interest is
suppressed by the banks and the government..."
Gold hoarding is warehousing and is a function of "interest rate":
"...In case interest is suppressed by the banks or the government,
he will hoard gold in protest, and dishoard it as the rate of interest is
subsequently allowed to rise. In case interest is suppressed by the banks
or the government, he will hoard gold in protest, and dishoard it as the
rate of interest is subsequently allowed to rise..."
...Gold hoarding provides an escape for the individual from the harsh
consequences of the predatory monetary and credit policies of the banks
and the government as they plunge society into debt slavery. In the
absence of the safeguards of a gold standard debt slavery is inevitable
for those who fail to use the only prophylactic available: gold...
...Let us turn from the nexus between gold and interest to the nexus
between interest and basis. Mainstream economics made a fatal mistake when it failed to study the consequences of the emergence of the futures
markets in monetary metals. It was not a spontaneous failure. It was
inspired by the banks and the government that have taken upon themselves
the "burden" of financing research. They have a hidden agenda: to keep the
public in deep ignorance and stupor.
Recall that there are no futures markets in monetary metals under a gold
standard for lack of volatility, without which speculation cannot be
profitable. But no sooner had volatility appeared than futures markets in
silver and gold sprang up. As they did, a whole new field of tantalizing
research opened up for investigation. Unfortunately, what it shows is an
appalling and scary prospect for the Brave New World of global
irredeemable currency. It shows dissipation and destruction of capital on
a large scale through falling interest rates, and the drying up of new
savings through rising interest rates. This is the first time ever in
history that irredeemable currency has been foisted upon the entire world,
causing the rate of interest to gyrate. Humanity was herded aboard a paper
boat named "Dollar" and tossed onto a stormy sea with no anchor on hand.
No wonder that the powers that be are anxious to put research under taboo.
It is in their interest that the public stay in blissful ignorance about
the fact that the captain of their paper boat has no navigational
instruments while sailing on uncharted waters..."
"...Hoarding is not a dirty word, least of all gold hoarding, in
spite of dark hints to that effect dropped by Keynes. The essential
services of the warehouseman must be studied seriously and without
prejudice on the same footing as those of the producer. The marginal
bondholder who decides to sell his bonds in protest against low interest
rates, and to invest the proceeds in gold, must not be depicted as
Scrooge. He is a legitimate warehouseman who carries the hard core of
social savings at a time when banks behave like drunken sailors on leave
at the waterfront, and governments engage in compulsive overspending as if
there was no tomorrow. The resulting capital destruction is appalling.
After Armageddon no one but the warehouseman, alias gold investor, will be
in the position to supply capital for reconstruction. Thank heaven for
goldbugs. Without them we would have to go back and start from scratch as
cavemen..."
Note above Dr Fekete pointed out that the creation of the volatility of paper derivative (futures) markets (via abolition of gold and bi-metal standard) was necessary to create imbalances (from free market balance) of "interest rate", which first lead to an imbalanced dishoarding of gold (due to lies that "interest rate" is higher for return on derivatives). And in the end this destroys savers and producers. The bi-metal standard is necessary to place a balance on "interest rate" relative to "space" and "time" in the
free market.
March 8, 2007
antithesis@coolpage.com
Shelby Moore is sole creator or contributor to numerous commercial
software, e.g. Miningpedia.com (2006-), TurboJet, CoolPage (1998-). WordUp [archived] (1986-1989), Corel Painter (1993-95), EOS PhotoModeler, etc..
www.coolpagehelp.com/developer.html
Email this Article to a Friend 
Printer Friendly Version