End The FED. Get The Gold By Gary North

The essence of a gold coin standard is the veto. Where should the veto be lodged? Defenders of the gold coin standard say that it should be lodged with those people who use gold coins, or who use IOUs to gold coins in their economic decisions. The defender of the gold coin standard says that the individuals who use gold coins or own IOUs to gold coins are the most reliable people to exercise a veto over the commercial banks, and therefore over the central bank, and therefore over the national government.

STATIST GOLD STANDARDS

There are some people who say they are in favor of a gold standard, but they do not want a gold coin standard. They do not want the authority to exercise the veto held by the common man. They want a gold standard based on cooperation among central banks. This was the gold standard that was established in 1922 at the Genoa conference. It was extended by the Bretton Woods agreement of 1944. It was the gold standard that Nixon abolished unilaterally on August 15, 1971.

This gold standard places authority in the hands of government-licensed monopolies called central banks. Its defenders trust the wisdom of central bankers. It does not trust the wisdom of individual citizens. So, the defenders of non-coin gold standards are impressed with the wisdom and reliability of central bankers.

William F. Buckley over a half century ago came up with a delightful quip. He said that he would prefer to be governed by the first 200 names in the Boston telephone directory than by the faculty of Harvard University. He did not say this because he was a graduate of Yale. He said it because he did not trust the wisdom of a self-selected, tenured or tenure-seeking faculty at the most prestigious academic institution in the United States. In other words, he did not trust the judgment of academicians. He believed that the common sense of the average man is more reliable than the highly rarefied academic skills of the University faculty. I am in agreement with him.

Buckley was talking about political sovereignty. I am talking about economic authority. I believe in decentralized political authority. I believe that governments are more responsive to voters at the local level than they are at the state or national level. But I also believe that the transfer of economic authority in the form of private property, especially the ownership of gold or silver coins, is more important for the preservation of liberty than the transfer of political sovereignty back to local units of civil government.

People are more careful about spending their money than they are about voting. They spend their money constantly. They vote only occasionally. They spend their money on aspects of their lives that they are closely familiar with. They are barely familiar with local politicians.

So, with respect to that crucial resource, knowledge, it is more important to decentralize ownership than it is to decentralize political power. They both should be decentralized, but if local voters do not have authority over the monetary system, by means of a gold coin standard, their right to vote locally will be compromised politically. The major decisions will still be made by the central government.

This is why various forms of gold standards that do not transfer complete authority over gold in the hands of common citizens are phony gold standards. They are gold standards that favor the expansion of centralized political power. They do not favor lodging the veto in the hands of the common man.

I am proposing the transfer of all authority over money to the free market. The only standards that should be enforced by law are standards of contract law. When a bank issues an IOU to a specific fineness and weight of gold coin, that bank by law must have coins and reserve to enable it to honor its contracts for gold coins. The government should be out of the money business.

The government does have the right to establish the form of money that citizens must use to pay their taxes. The government should limit itself to a statement regarding the weight and fineness of the tax coins. If private enterprise produces coins that meet these standards, the government must accept such coins as valid for the payment of taxes. The government lawfully controls the form of taxation; but it should not have any power to monopolize the production of coins. Governments have always asserted this authority, and they have always done so to the detriment of liberty.

What I am describing is the restoration of a free market in money. This means that the authority over money must be removed from the United States government and transferred to the users of gold coins. They would exercise this authority over money, not as voters, but simply as residents of the United States. They would have the right to use this money as currency, or deposited in warehouses on their behalf, or sell to jewelry companies, or hoard the coins. This would be a free-market system in coinage.

A LITMUS TEST FOR FREE MARKET ECONOMISTS

Very few people believe in the free market. This is true of virtually all academic economists. The proof that they do not believe in the free market is that they oppose the creation of a full gold coin standard. They say they believe in the free market in many areas of life, but they do not believe in the free market with respect to the monetary system. Yet, above all other areas of the economy that ought to be governed by the free market, the money system should be. Why is this? Because money is the central institution in a market economy. Control over money is the central form of economic control.

We have seen this with a vengeance with the passing of the banking reform bill of 2010. The great winner in the reform is the Federal Reserve System. It receives the authority over the banking system. It is not limited merely to control over the money supply; it now possesses the authority of direct regulation and intervention.

The central banks of the world have now become allocators of capital. They are making the decisions as to who gets what and on what terms. Central planning over money increasingly has become central planning over the entire economy. This is not a mistake. This is consistent with the original logic of central banking. It means government control over the money supply.