George Rebane
A trillion here, a trillion there – to an innumerate citizenry all these zeros mean nothing. They are told that it is all needed for an economic ‘stimulus’ whose workings no one knows or will attempt to explain. The only thing you need to know about the stimulus is that it is “necessary”, to which the President adds that we shouldn’t quibble about the “details” to delay its passage. (see ‘Exactly How Does the Stimulus Work?’ by Henninger today) And he may be right since the main purpose of the stimulus is to assuage that something is being done. But what about the trillions?
Well, the trillions don’t really matter that much any more because it isn’t denominated in real money. It’s really going to be paid off in what is known as fiat money – Monopoly money that only has value as long as we keep pretending. And a lot of folks these days are beginning to see the light. Indiana last month introduced a revolutionary bill – ‘Indiana Honest Money Act’ (SB453 here) – that the MSM carefully ignored. The bill would allow Indiana residents to conduct all state business in a “medium of currency based on gold and silver”. People in other states (e.g. Virginia, New Hampshire) are beginning to make similar moves.
The US Constitution is specific about what our legal tender should be – gold and silver (Art 1, Sec 10, Cl 1 here). The Founders were all aware of the historical consequences of governments that start debasing the public’s currency with play money, and wrote a prohibition against that into our Constitution. Almost all states’ constitutions echo that prescription. Then came the Federal Reserve System and soon the Constitution took another body blow to our wallets.
Today Judy Shelton writes a provocative article – ‘Capitalism Needs a Sound-Money Foundation’ – in the WSJ suggesting that we should return to the roots of capitalism and have competing monies in the marketplace – let the people decide what they will accept for payment. Today our fiat Federal Reserve Notes, backed only by religious fervor, is the only money declared as legal tender – i.e. the only money that our legal system will recognize as a store of value, payment of debts, and measure of accounts. Imagine what would happen to our economy if honest money again became the medium of exchange.
I don’t think that the swindlers in Washington will allow their funny money to suffer competition any time soon – after all, where then would all those stimulating trillions come from? But I have an idea for a half-way step that perhaps will start us on the road back to an honest monetary system. Please hear me out.
I propose that we start writing into our contracts, loan agreements, purchase agreements, etc. that the accounts will be cleared in dollar amounts based on the spot price of, say, gold (or another suitable commodity) on the date the account is due. In other words, we would still use the legal tender funny money – excuse me, Federal Reserve Notes – to pay our accounts, but the amount of the legal tender would be based on the reference amount of the commodity on the date of the contract. Doing this would only require adding a statement that all payments are to be calculated in, say, ‘gold dollars’ or ‘Audollars’ (pronounced ‘Oh-dollars’) – my suggested symbol would be A$u – with the day’s conversion price cited. This, by agreement, may be the day’s spot price (e.g. ‘12feb09 @ $900/oz = A$u900/oz’) that becomes part of the contract. The account would be cleared by the payment of regular dollars that convert to the contracted A$u amount based on the then price of gold. This still keeps all transactions in terms of the government supported legal tender, and allows the contracts to maintain the same simplicity, with regard to future payments stated in A$u, as they do now in regular dollars.
An example may help. Suppose I want to borrow $10,000 today, and promise to pay it back a year from now. The lender will charge me 5% per annum but requires that the loan agreement be in A$u. So it is written that I borrow A$u10,000, which today equals $10,000 (‘12feb09 @ $900/oz = A$u900/oz’), and on 12 February 2010 I promise to pay back A$u10,500. When that day arrives the spot price of gold is, say, $1,000/oz which still equals A$u900/oz. But now my payment of A$u10,500 converts to (1,000/900)*10,500 regular dollars or $11,666.67.
When people actually start using A$u in business, you can bet that everyone will be interested in what the politicians are doing in Washington. Everyone will know, up close and personal, that inflation is an assets tax that the government levies silently on an ignorant electorate.
[update – a reader sent me an interesting link that may shed some light on the make up of the stimulus bill (at least the current House version of it) in a very graphic manner. This still doesn’t tell us how it will work, but it does show how it will probably be divided up.]
[17jun09 update – a half-way solution to Audollars may be GoldMoney. It’s worth considering.]
rebanesruminations.com 
Leave a comment