Buy Your Chevrolet with a Chevronet

August 30, 2001

We have considered what makes a particular currency "hard," while another, equally valuable-or worthless, depending on your view-is "weak." It has nothing to do with the paper itself. Paper is paper. A weak currency can be beautifully printed on gorgeous paper, while a strong currency can feature so-so engraving on ho-hum paper. But the "strong" paper will buy lots of wonderful things, and the "weak" paper won't. The economic strength of a currency derives from the economic productivity of the people, not the other way around. Perhaps more important: the world's major monetary players will take the "strong" currency seriously, while dismissing the "weak." In today's global economy, it is not sufficient to have a currency that suffices at home. The locals, after all, will use anything they can get away with. When Marco Polo found that the emperor was using beaten tree bark, embossed with his seal, as "money," he was amazed, but there was nothing amazing about it. The Chinese could rob each other with this stuff, because the victim knew that tomorrow he would be the predator, passing the beaten-bark money to a countrymen. Of course, a citizen of, say, Venice, would have given nothing for a barrow-full of beaten-bark, but the Chinese were not dealing-yet-with the Venetians.

The current war is being waged between the issuers of fiat currencies. All are equally fraudulent, having been issued without reference to anything on deposit to which the holder has claim. The battle, therefore, does not concern the merits of the scrip itself, but the strength of the issuing institution. Can it maintain the "buying power" (the only way the value of a fiat currency can be measured, and a very sloppy way at that!) which first attracted foreign users? (Domestic users are forced to use the stuff via legal tender laws, assuming that they ever thought about it.) Can producers be persuaded to keep producing, even though getting more and more inflation for their efforts? Will they keep borrowing in such a circumstance? Without continual borrowing the system implodes.

Of course, once a single issuing bank has control over the world currency, it doesn't matter. Absent competition, the currency can be made of old Genghis' tree bark, and inflated as much or little as desired to placate the largest users. Strict laws prohibit any potential bark-beating competitors from entering the picture. Their counterfeit would be illegal; only the world-government-sanctioned counterfeit is to be used.

But wait! Something absolutely unprecedented has happened! It's called the Chevronet, and it's popping up in Russia, of all places. Or, perhaps, that's exactly the place you'd expect to find it: a country of vast resources without a decent medium of exchange. The Chevronet is GOLD!!

In the early days of the 20th century, nearly one hundred years ago, a familiar Russian coin was the 10 ruble piece, consisting of .2489 ounces of gold. The Chevronet is a re-issue of that coin. It was originally minted as an item to sell to collectors at the time of the Moscow Olympics in 1980. A way to obtain some "hard" currency! But visitors to Moscow weren't interested in the Chevronets; they accumulated on the shelves of Russian banks, until someone-specifically, Viktor Gerashchenko, the chairman of the Bank of Russia--had the bright idea---finally!---to make them acceptable for payments throughout Russia.

If nature is allowed to take its course, we shall see once again the operation of Gresham's law. Certainly, within Russia itself, workers given the choice between the Chevronet and the paper ruble will have little difficulty in deciding which to choose. And companies outside of Russia supplying the goods that country needs will certainly jump at the chance to exchange their goods for Russian goods (i.e., gold) instead of Russian paper.

While the productive Russians may prefer the gold, it is likely that the drones-those in government service---will oppose it. The Russian government will not own the gold, and will not produce it. It cannot conjure it up out of thin air, issuing or withholding issue, as political needs dictate. The Chevronets will give the Russian people control of their own property, which they can use as a medium of exchange. As the ones paying the piper, they will call the tune. Not very acceptable to the political class!

Until now, the U.S. dollar, whatever and how-much-of-it it may be-of course, it isn't defined anywhere-has dominated international markets. The yen has been beaten back, and the euro, after a promising start, has faltered. The boys at the Fed have got the experience and the clout. What they cannot fight, of course, is reality. Actual real, tangible, measurable money makes even the prettiest scrip look like what it is---just a piece of paper. The arrival of the Chevronet could be the most important step taken toward the restoration of freedom in a generation.

A one-ounce gold nugget is rarer than a five-carat diamond.

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