We are on the road to serfdom

Road

We are now five years into the Great Fiat Money Endgame and our freedom is increasingly under attack from the state, liberty’s eternal enemy. It is true that by any realistic measure most states today are heading for bankruptcy. But it would be wrong to assume that ‘austerity’ policies must now lead to a diminishing of government influence and a shrinking of state power. The opposite is true: The state asserts itself more forcefully in the economy, and the political class feels licensed by the crisis to abandon whatever … [Read more...]

U.S. Republicans introduce gold standard debate – mainstream media go mental

1 kilo gold bar

I am not holding my breath over the Republicans' plans for another gold commission to investigate the possibility of returning the USA to a gold standard in the case of the Romney-Ryan ticket winning. Of course, I like the Classical Gold Standard, which existed from about 1880 to 1914, and I am convinced it was a humongous mistake to do away with it, a mistake that was further compounded by the abandonment of its weak successor, Bretton Woods, in 1971. And you know what I think of our present unconstrained fiat money … [Read more...]

The triumph of politics

Richard Nixon

On August 15, 1971, President Richard Nixon declared that the United States would no longer honour its promise to exchange US dollars held by foreign central banks for gold at a fixed price of $35 an ounce. The innocuous term 'Nixon closed the gold window' that is now widely used to describe this act does not quite convey its significance. (Was something to be stopped from going out or from coming in through the window? Can the window be reopened again?) What Nixon did was cut the last remaining official link between the … [Read more...]

Is gold in a bubble?

gold

To answer this question is not straightforward. As the gold-sceptics keep reminding us, gold pays no coupon and no dividend, it does not offer a running yield, so traditional measures of 'fair value' do not apply. But gold is money, and just as the paper ticket in your wallet does not pay interest, neither does gold. Gold is a monetary asset that has functioned as a medium of exchange and a store of value for thousands of years, around the world and in almost all societies and cultures. Many modern economists believe that … [Read more...]

The separation of money and state

IMF headquarters

"So what do you think should be done?" I often get this question after I presented my case against our fiat money system, and I sense there is a trace of frustration in it, a bit along the lines of, you are telling us that we are in quite a mess but you offer no policy prescriptions. That is a fair point, I guess. Most writers who lament the economic ills of our time usually have a bag of policy advice on offer. Indeed, whispering new policy ideas into the ears of those in power is what most of these writers aspire to. I … [Read more...]

Please don’t call this capitalism!

Eurotower in Frankfurt

Surprise, surprise, the Euro Zone debt crisis is back. Or was it never gone? As yields on Spanish and Italian government bonds are heading higher once again, I am reminded of the old saying, you can't fool all of the people all of the time. Not even with a trillion euros. I previously described the relationship between banks and states as that of two drowning sailors who desperately cling to one another, and I still think it is an apt description of the charade that is being orchestrated in Europe and that is already … [Read more...]

My big fat Greek bailout

Parthenon

Greece was bailed out for the second time in four months. Or did it default? Well, a bit of both, I guess. All bondholders are equal. But some are more equal than others. If you are the ECB, your Greek bonds were exchanged, par for par, for new Greek bonds, and you can go on pretending that they are worth their principal amount. You won't have to report a loss for now. But if you are a 'private' entity - and that is a rather loosely used term these days as it includes the banking industry which is either now partially owned … [Read more...]

Aggregate nonsense

dollar notes falling from sky

The economic policy debate is dominated by wishful thinking and fallacies of the most dangerous kind, propagated no less by the high and mighty in the policy bureaucracy and the alleged experts in the media. Here is my point, and every clear-thinking person already knows it: That economic growth, and thus recovery from the crisis, will come about through the actions of governments is complete and utter nonsense. It is an illusion to assume that running budget deficits and printing lots of money and manipulating prices will … [Read more...]

Big Brother Loves You!

George Orwell

"All within the state, nothing outside the state, nothing against the state." Benito Mussolini Those who have eyes to see and ears to hear will have noticed the accelerating trend towards interventionist policies and assertive state action all around us. This is not a conspiracy theory circulating on the internet. It is a phenomenon that is now so blatantly obvious that it makes the headlines in the highbrow pro-establishment media: The Economist and the Financial Times are talking openly about the trend towards … [Read more...]

“When they stop buying bonds, the game is over.”

Floating currency symbols

I took the title for this blog from an interview that James Turk of the GoldMoney Foundation conducted with Eric Sprott, a Canadian fund manager. You can see it here. (I also recommend you have a look at this interview with Doug Casey.) I think the quote is a succinct summation of the role that the bond market, and in particular the market for government bonds, now plays in this crisis. As you know, I would not touch bonds with a barge pole, especially government bonds. After 40 years of unending fiat money expansion, the … [Read more...]