first majestic silver

The situation in Asia seems to be Heating up

September 11, 1998

Greg Mastel is a member of the Washington think-tank Economic Strategy Institute. He is concerned about the economic situation in Asia, declaring "It's like hurricane Bonnie." These problems are not of our own making, and they are beyond our power to eliminate." True---and false!

Not of our making? Well, what exactly are the problems? In a nutshell, they are burgeoning debt, which cannot be paid. That is hardly a problem not of our making. We have adopted a monetary system which makes debt payment impossible. All modern money originates as a loan from an institution which creates it from nothing, and demands back, as repayment, more than was created. Overall, the total debt, therefore, exceeds the amount of money available to repay it.

Because individuals can service their own debts, the inability of society as a whole to do so is unappreciated, but nonetheless enormously significant. The final result of this, which we may see unfolding, is economic catastrophe. To regard this as a kind of "act of God" is incorrect, however. God, in fact, gave us genuine wealth to use as a bartering agent; and once obtained, it did not need to be returned to its source with interest. We have spurned that system for the quick profits available to the lending of imaginary money, and now are reaping the whirlwind.

Are these problems beyond our power to eliminate? What have we done to eliminate them in the past? Well, the "aid" given to Thailand and South Korea by the IMF is regarded as contributing to those nations' wobbly economic stability. This "aid," however, was more debt. It was a cure consisting of more of the same poison. The effects cannot be permanent. It didn't seem to work in Indonesia.

Pundits are quick to point out that political solutions must complement the economic elixirs. A Treasury official tells us "Ultimately, what is important to a successful resolution of these problems is sustained implementation of strong policies to restore confidence." What makes modern money work, according to the Federal Reserve, as well as common sense, if the confidence people place in it. Since Monopoly money is, in all respects save the esthetic, as satisfactory a means of exchange as Federal Reserve Notes, why don't people employ it? They have no confidence in it! They would laugh if offered Monopoly money in exchange for their goods or services. And should they lose confidence even in the official monopoly money, the government can inaugurate policies to restore that confidence. Taxation is one such method, giving people reason to think the money is valuable, and required for government operation.

In Russia, Yeltsin has demonstrated the political aspect of economic policy by firing the entire government except himself. Perhaps if the Russians can be made to believe that their suffering was the fault of those inept officials, now rightly turned out to pasture, they will regain their confidence in the ruble. Yeltsin evidently feels it's worth a try.

And, in truth, perhaps the reigning economic powers do not want to solve these problems.

In Japan, in 1987, I saw a television program wherein a group of Japanese schoolchildren were being interviewed. The host asked them the rather odd question, "Do you think Japan will ever be involved in another war?" Many of the youngsters said Yes. "Who will the enemy be?" was the next question, and the response was unanimous. "The United States!" That war is being fought now, perhaps, and Japan is losing.

The Bible tells us that the borrower is slave to the lender. All of our money, wherever we live, is loaned into circulation. The banking fraternity with the largest number of debtors is the ruler with the most clout. The device used to obtain international mastery is the exchange rate. The dollar, until recently tied to actual money (i.e., gold) in international exchange, is still perceived as strong. This perception is given enormous impetus by virtue of American productivity and know-how. We still make the world's most desired goods, and offer the most needed and sophisticated services. Our bankers are better than those in other countries at maintaining confidence in the local scrip. Unfortunately, bankers are an international fraternity, and seem to demonstrate little loyalty to their country of birth. At the moment, however, they find it in their best interests to have a "strong" dollar, and the creators of other monetary devices must adjust their exchange rates accordingly.

Venezuela is rumored to be about to "cheapen" its currency vis-a-vis the dollar, and Brazil may soon do the same. American goods will become harder and harder to sell around the world in countries which find them relatively more expensive with each re-evaluation of its currency. The strong dollar plays havoc with our balance of payments; a weak dollar, however, reduces foreign investment in America, and makes foreigners less likely to "buy" American debt.

What is the solution? There is no solution. A tightrope walker either stays on the rope, or he falls off. If the rope begins to vibrate and swing, sooner or later he will fall.

Sound money, i.e., money which can be weighed, analyzed, and standardized, makes possible a sound economy. There isn't a hint that anyone in the world of finance would even consider a return to sound money. Indeed, it is likely that for some, born since the advent of 100% fiat, the idea is totally alien. For others, the profits to be earned on the lending of nothing are too vast, and the power thereby gained too appealing, to make any other system acceptable.

A quick-fix, however, will be offered: a one-world currency. The to-be victims of this scheme will clamor for it once convinced that it is their best hope for financial security. Among the world's powerful, a one-world government has always been the objective, and they have not kept that objective secret. When we have one government, one bank, and one company making everything, the war will be over, and we will have lost/won. It won't make any difference.

Gold is the official state mineral of Alaska.
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