By Alex Wallenwein
January 26, 2005
The Trouble with Money
The trouble with money is that people believe
in their hearts that everything other than earning, saving,
and spending money is something "too difficult"
for them to understand and is better left to economists.
Why do they think this? Because it is horrendously complex
and difficult - but it doesn't need to be.
The reason money is such a difficult subject
to think about is that its foundation was literally screwed
up from the very beginning. Yes, I said "from the beginning."
Even in the days when gold was king, the money concept was
still screwed up. It is that very "screwed-up-edness"
that has enabled the money powers of today to subvert the
concept so completely that even noted economists like Al
Greenspan don't know what "money" is anymore.
He admitted as much sometime back in 2003.
The truth is, though, that money is very easy
to understand if you get rid of the most important misconception
in its history, and that misconception is this: That the
value of gold, history's primordial money, needs to be expressed
in terms of something other than gold.
That misconception is the root-cause of all
confusion about money and every scientific and policy-making
process involving it, especially economics. It is the reason
people believe this ruse that economics is so "difficult."
Unfortunately for all of us, the experts have
turned out to be most expert in one thing, and one thing
only: in extracting and arrogating to themselves the control
over the value of money. In doing so, they took it away
from you and me where this control originally belongs. In
doing so, they were able to switch real money - money with
real, intrinsic value - with little more than confetti,
right under our noses.
It is not my point at all to say whether this
misconception is an intentional fabrication of a few well-heeled
insiders or an historical quirk in the ways people have
learned to think about money. That is irrelevant. The fact
remains that it is indeed a misconception, and that's bad
news - but it is also good news.
The bad news is that this misconception is
the cornerstone of most people's concept of the economic
and financial universe. Most people alive today have never
lived in a time when gold was official money.
The good news is that, just as any misconception,
this one can easily be cleared up by facts and solid reasoning.
In other words: by truth.
History has proven that gold is the best money
- bar none. Our current experiment with a world-wide, all-fiat,
currency system is only about 30 years old. But even during
the classical gold standard's heyday money wasn't "real"
- because gold wasn't really "money" in those
days - at least not in the complete and unified sense we
are about to discuss.
In the gold-standard days, gold was only the
stuff that backed the "money" of the day - money
that had already begun to be thought of in terms of paper
bank notes and gold certificates. Yes, gold itself was also
circulated as currency, but far less so than its paper-proxy.
It was mainly saved or used to settle international trade
accounts and very large transactions.
I will go so far as to say that gold wasn't
really "complete money" back when gold pieces
themselves were still changing hands, in the days before
the invention of paper-bills and drafts.
How can I say this?
In those days, gold was surely the medium
of exchange, and it certainly was the store of value of
the day - but what was its value stated in? It was almost
always stated in terms of something else. Most of the time,
gold was never counted as "so-and-so-much gold."
It was always counted in terms of "ten Dukaten",
"twenty Dollars", "fifty Marks", "one
hundred Gulden", etc.
That's where the problem lies.
People's popular concept of money was never
really unified in the substance that was used to represent
it. Without getting too esoteric about it, let's look for
a moment at the commonly accepted functions of money. There
are three of them: money's functions as
A unit of account
of exchange, and
You can immediately see that fiat completely fails to fulfill
the last function. Fiat has no intrinsic value, so it can't
store any. It's value must be supplied "from the outside"
if you will, by the government/central bank complex that
issues it. This is usually done by sheer force (legislation)
and empty promises. Both the force and the promises are
only worth anything as long as the government is able (and
willing) to back up that value. And that, as we all know,
can change over time, sometimes very suddenly, which leaves
you hanging out to dry.
Even when actual physical gold changes hands as money, with
or without official sanction, these three functions are
never perfectly united in the actual substance of money,
i.e., the gold or silver bullion itself. That is, the physical
weight of the bullion itself was never used as the method
of counting the value of the money, i.e., as the "unit
of account." As long as the unit of account'
function is described in terms of an arbitrary measure that
lies outside the very piece of bullion you are dealing with,
all kinds of evil can be perpetrated on a currency.
"As long as the unit of account' function is
described in terms of an arbitrary measure that lies outside
the very piece of bullion you are dealing with, all kinds
of evil can be perpetrated on a currency."
It is this idea, the idea that money needs to be called
something other than what it is (namely, a certain
quantity of gold of a certain purity) that has allowed bankers
and money-lenders the world over to totally subvert and
debauch our money to the point where it has no value other
than the one they tell us it has. And it is also what now
makes it so hard for them to figure out what "money"
actually is anymore (under their own screwed-up definition
They surely are experts, aren't they?
Right. But experts at what? They are like
modern baking companies that manufacture bread of the US
"white bread" variety. Modern bakers leech all
real nutrients out of the flour they use to bake the bread,
and then they artificially "enrich" it with stuff
that wasn't in there before.
Modern-day money changers (bankers) do the
same thing. They take our money (precious, intrinsically
valuable, and stable gold) away from us and leave us with
a disembodied, hologram-like substitute that has no value
at all. They then proceed to "enrich" its value
by what they call "monetary policy", which is
essentially another name for "inventing ever more complicated
lies to make you believe that what you work so hard to earn,
spend, and save every day has any real value."
All the while, that so-called "value"
How can all this confusion, this deception,
By firmly establishing in the public's mind
the concept of the "Money-Unit"
- that is, the perfect and organic union of all three functions
of money in the very thing that is traded and exchanged
for goods itself - the physical gold coin in your hand or
It makes no sense at all to call an ounce
of gold that was stamped into a little metal disc a "twenty-dollar
piece" or whatever. It makes far more sense to call
it a "one-ounce piece of gold." How much is that
worth? One ounce of gold. There can never be any
confusion about the value of money anymore if this is how
monney is constituted and counted.
To do this effectively, a gold (or silver)
piece must be of a certain minimum fineness of gold, must
have certain universally acknowledged dimensions, and must
be stamped with nothing other than its actual, physical
Objections, Objections ...
People may ask: "How
can you be sure that what you earn or receive from another
is actually gold of that purity and weight? You'd have to
assay it every time you accept one." (Oh, if
only people were as suspicious of paper-money as they are
of gold. But that day will come!)
Have you ever gone to a grocery store to exchange
your accumulated small change for dollar bills in one of
those coin-changing machines?
The technology is very simple. The machine
gauges the coin's weight and dimensions very quickly. Only
coins of the correct weight and dimensions are accepted
as "real" and given credit for. (Only coins of
the exact bullion content required can meet the dual weight
and dimension criteria.) Given the atomic weight of gold,
this dimension-to-weight ratio is extremely difficult if
not impossible to fake. The very same thing can be done
by installing smaller versions of this kind of machine on
any super-market (or other store) checkout counter.
"But ... gold is so heavy. You'd
have to carry sacks of it around with you every time you
Maybe if you are shopping for cars or homes.
For everyday transactions, silver would be more suitable.
For very small change maybe even copper. If you are security
conscious, you can use a private digital gold-currency debit
card that automatically adds and subtracts balances of physical
gold in your "holding" as you buy and sell things.
Although such cards would represent a "proxy"
for gold/silver and not the real thing itself, they are
still denominated in terms of actual bullion weight - not
"dollars", "francs", etc.
"But ... you won't find any stores
that accept gold instead of paper-cash or checks, credit
cards, etc., that are denominated in national paper currencies."
That's just a matter of convincing a few large
retail chains that they are better off earning bullion from
their customers than fiat - because bullion's value cannot
be inflated away or diluted by falling forex values. This
is especially easy to do in environments like our current
one where the dollar just keeps on falling and falling,
and where the threat of a total currency collapse cannot
be ruled out. Once these retail chains latch on to the idea,
others will, too. Eventually, people can demand to get paid
in bullion by their employers.
"But ... the government won't go
along with that. They'll just confiscate gold all over again
and call it a national emergency' or whatever."
Sure, they could do that - but what if they
It would only serve to make clear to the entire
world that gold is the true value underpinning all fiat
"currencies" - despite all of their claims and
treaties that attempt to establish the contrary idea in
people's minds. It would also only serve to make crystal-clear
that all past attempts at marginalizing gold in the eyes
of the public amounted to nothing but fraud, theft, and
collusion. And that means people, this time,would know that
such a renewed attempt to confiscate is nothing but more
of the same - and would hopefully respond by showing some
moral backbone. (I'm an optimist, I know!)
By the time the use of pure bullion currency
and its electronic variant (like GoldMoney, Pecunix, e-gold,
etc.) becomes widespread enough to make the government pay
attention, people will have understood this concept of the
they do, imagine a government trying to take gold away from
them and tell them: "Here, take this recently-proven-to-be-worthless
paper-currency in payment' for your valuable bullion
Preventing Further Deception
Back in the days of FDR when he confiscated
all private gold during 1933, the paper-bills floating around
in which he "paid" Americans for their bullion
were called "dollars". The gold coins they (at
least in theory) represented was also called "dollars"
- so it was easy to confuse the public by saying: "Hey,
look here, we're giving you your money's worth, dollar-for-dollar,
so don't complain!"
Public awareness has progressed to the point
where the government is forced to take note, let them try
to convince even an apathetic public that paper-dollars
are the monetary equivalent of actual weights in gold or
silver. Ha! I'd like to see that!
"Constant Marginal Utility"
As most people reading this know, gold has
several huge advantages over other "monies":
It's compact, easily transportable, infinitely divisible,
non-perishable - and it cannot be over-produced.
Production is slow, so any possible inflation of the
volume of bullion money is slow as well. Price-inflation,
that scourge of modern life, is therefore nipped in
the bud as well.
Gold has a "constant marginal utility."
Okay, so there is some economist-jargon. No
big deal. "Constant marginal utility" means simply
that each additional unit of gold owned or acquired by an
individual, business, or government, is worth the exact
same amount to that entity as the previous one.
With other commodities, this isn't so. Think
about frozen T-bone steaks. Once you have a year's supply
(or whatever amount) stored up, i.e., once you are "satisfied"
that you have "enough", each additional (marginal)
steak you procure is of less and less USE (utility) to you.
In economist's terms, that means steaks have
a "declining marginal utility."
With gold it's different. It is so tradeable,
so easily storable, it keeps its value so well, is souniversally
acceptable, and is therefore so useful to people, that each
additional unit is of no less use than the previous one.
With fiat, it's more like the case of the
T-Bone steaks, although for different reasons. Fiat can
be printed at will. Its amount in circulation can be increased
virtually over night, so the temptation for the regulators
of fiat (central banks) to do exactly that to get themselves
out of an occasional "tight spot" is huge - and
as we all know, they regularly succumb to that temptation.
Fiat can be created at such a rapid pace,
in such enormous amounts, that its value shrinks dramatically
over time. More money competes for the same amount of goods,
so prices rise very fast. When this happens, the next dollar
you earn is worth less to you (it buys less) than the previous
one, so fiat's marginal utility declines just like that
of the T-Bone steaks.
That means you are not in control of what
your saved money will be worth in ten, twenty, fifty years.
A bullion currency can be inflated, too -
but only with great effort and expense - and not by very
much. A country can trade for gold and accumulate a surplus,
or can dig it out of the ground. As the amount of gold coins
in circulation increases, prices rise - but only very, very
slowly. When citizens of a country own lots of gold and
circulate it (i.e., the domestic money supply increases)
and they see domestic prices rise as a result, they tend
to buy cheaper foreign goods. As a result, gold flows out
of the country to pay for the imports until prices fall
again - naturally.
The result: an AUTOMATIC price-adjustment."
This happens automatically., i..e., THE MARKET
(all people interacting and exchanging goods and services
voluntarily) determines the level of prices and the flows
of bullion from one country to another. No central banks,
no governments are needed for this process in any way! And
the value of the bullion is very stable over time. In such
an economic environment, governments are reduced to their
proper function: to make sure that people don't steal from
each other or kill each other, to provide for the common
defense, and to provide a forum for legal disputes over
That's why bankers and governments are so
scared of gold, and that's why they will fight to the death
before they re-institute a gold standard on their own. That
is why such a bullion-standard needs to be initiated as
A Private-Issue Currency
This bullion-weight currency must be issued
and distributed privately, by the people only, without any
government input, until governments are confronted with
Another benefit is that, in the case of a
bullion currency, the market similarly operates to keep
interest rates very low and consistent. Interest is what
one charges for loaning out bullion. When bullion is lent,
the lender actually parts with the value of the bullion
lent out. When fiat is lent on the other hand, the bank
parts with precisely nothing!
The bank creates a bookkeeping entry on your
account (a "credit") and a piece of paper (your
loan contract) says that you must "repay" that
"loan". You have to now work or make a profit
to repay that money with interest. The bank gets the benefit
of your labor and effort. You get - in essence - NOTHING.
In the process, money is created. The banks
loan it into existence. People buy and sell with it, and
prices rise. Inflation heats up. So banks raise their interest
rates to stop this process and cool it off a bit.
At the same time, governments love the fiat
arrangement because it lets them borrow unlimited amounts
of money and run huge deficits whenever needed. This debt-created
money is what allows governments to fight endless wars.
So, don't count on your government - whichever
government you happen to live under - to "do the right
thing" and "go back on a gold standard."
If you want one, do it yourself.
The Thing to Remember:
Valuing bullion in terms of a fictional, arbitrary
unit of account other than the bullion's exact weight leaves
the door open for bankers and politicians to tinker with
the currency. What happens when they get to do that we all
can witness first hand right now. Only a purely weight-denominated,
100% bullion content currency can prevent that, and such
a currency must be privately issued and distributed, using
nothing but free-market forces and channels.
That's the way out of the stealth-tax called
'inflation.' That's the way out of having only worthless
pseudo-money to earn, save, and buy things with. That's
the way to protect yourself and the world from government
tinkering with your life's savings by "adjusting"
your money's value according to their own needs - and that
"need" is always to cover up their accumulated
The Founders' Biggest Blunder
At the same time, once use of this private
bullion currency is sufficiently widespread, a drive to
amend the Constitution must be initiated to make it the
law of the land that any attempt to subvert the Money Unit
- legislatively or otherwise - is punishable by death.
When the Constitution of 1787 was written,
the founding fathers failed to write that provision into
their document. They also failed to properly define the
Money Unit and to expressly
bind the federal government itself to the use of only gold
and silver as money - not just the several states.
That needs to be corrected.
A tall order, I know, but so what? The founders
and the people who lived in their days (a small minority
when compared to the total, often pro-British, US population
at the time) fought off the British Empire, the most powerful
political, economic, and military force of the then-known
world, willingly pledging - and in many cases sacrificing
- their Lives, their Fortunes, and their Sacred Honor.
So, can we take upon us whatever little risk
and effort lies in establishing and educating the public
about The Money Unit?
I think we can...
... I think we must!
Wallenwein Editor, Publisher The EURO
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