World Blog humble servant.Johnnie Ellington II .May 13, 2013.Free gold is not new. Free gold is the history of gold. Free gold is the use of gold for savings. Free gold is the use of fiat paper for transactions. Free gold’s definition has matured as the foundational thinking of a school of thought that I hold which says gold is going back to its original roll pre-convertibility..
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It is time for the discussion of the end game. The end game is the basis for the future.
The emancipation of physical gold from paper gold is in fact happening. I have always counseled that a return to convertibility is impossible because gold would convert out only. If gold is emancipated then by definition it is Free Gold.
Free gold is not new.
Free gold is the history of gold.
Free gold is the use of gold for savings.
Free gold is the use of fiat paper for transactions.
Free gold’s definition has matured as the foundational thinking of a school of thought that I hold which says gold is going back to its original roll pre-convertibility.
I do not hold too many of the political thoughts of Free Gold. Those are products of its new adherents. As a movement gains followers they usually destroy the truth, the teacher, or both.
Freegold derives its name from a monetary environment where gold is set free, and has no function as money. Gold is demonetized, and has one function only a store of value. The function of legal tender changes only slightly, it is a medium of exchange and unit of account, but stripped of the store of value function. In this environment, currency and freegold will coexist to supplement each other, without interacting with each other.
History
Freegold was first seen at the ancient times of the Roman Forum and its Greek equivalent. People gathered at the market place for trading, and used scrip money to facilitate transactions. Their scrip money was not intended to be a store of value, and a surplus of scrip money was converted to something more resembling a store of value like gold or silver. Later, and probably due to increased quality and general availability of Coining, base metals and precious metals were used as money, which brought us the gold standard and ended the natural freegold era. A gold standard prevented governments from manipulating the economy by debasing their currency, especially in deflationary times as occurred in the 1930s. Ever since, the importance of the gold standard has been reduced, first by removing convertibility for US citizens in 1933, later by removing the international dollar to gold convertibility for Nations in 1971, which ended the Bretton Woods system. That left the US dollar as a thought of gold, in the books of the US Treasury still marked at $42 2/9 dollar a Troy ounce, without any convertibility whatsoever. Without this official convertibility though, gold was still monetized, and a rapid increase in the price of gold would signal investors a decline of the value of the US dollar. This forced governments to actively manage the price of gold, documented by the Gold Anti-Trust Action Committee. With massive printing of currencies started after the Bankruptcy of Lehman Brothers in 2008, investors flock to commodities and precious metals, making gold price manipulation increasingly more difficult for governments and which in effect counteracts monetary policy.
Implications of freegold
Under a freegold system, people are encouraged to save their surplus purchasing power in gold, for future spending. There are some severe implications coming out of this. Savings accounts at banks will be less attractive (as this is an investment, not savings), leaving the banks with a declining pool of capital. Due to leverage function of fractional-reserve banking, it may greatly impact the financial industry.People who save their surplus purchasing power in currency and currency derivatives, may see their purchasing power greatly diminished when the monetary system is shifting to freegold, while keeping their savings in currency.
• Monetary policy will no longer impact the pool of savings (the savers).
• Interest rates will truly reflect the anticipated future purchasing power of currency.
• Countries will no longer try to devalue their currency for cheap exports. Quite the contrary, a strong currency will cause an inflow of gold, a weak currency will cause an outlow of gold.
• Freegold will solve the Triffin dilemma, as nations may opt for payment in what they perceive most valuable: currency or gold.
• Freegold may enable meritocracy; those who have (are) the labour force, natural resources or capital (gold) are in power,opposite to today where those who control the money are in power.
• Therefore,Freegold is allowing Third World countries to join the global economy, as they no longer need money to do trade.
• Freegold will put a brake on the debt based money expansion (due to its compound interest), as money is used for short term transactions only. This is more compatible in a world existing of finite resources and sustainable energy.
• Freegold,(yes) will better support Islamic banking, and Islamic countries might even opt for a gold standard, though leaving them without monetary policy capabilities.
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