Bring on the metallic monetary standard

We linked a video in the media section of retailers in the US banding together to begin exchanging value for value, as they will only accept in exchange for goods and services payment in gold or silver.

As a central bank has exclusive control over money supply, and as central banks are there explicitly as government’s banker, they can literally print new money at a whim which the government then spends on goods and services, wages, wars, whatever it chooses.  This is how government deficit spending has been sustained for so long across the developed world, by money printing.

Government can therefore get its hands on Rands in excess of those generated through taxes, at nearly no cost.  It exchanges this worthless paper for real value in the economy, essentially a fraudulent exchange.  The only way this paper has any value is because of the state’s legal tender laws, that make the use of competing currencies illegal, and makes the reproduction of Rands by anyone other than the central bank a crime.

This process is wealth destroying, drives inflation, creates the business cycle, and is the sole cause of the huge income inequalities we have today.  It hits the poor the hardest.

Gold has inherent value as it is in short supply yet is abundant enough to serve as currency.  Its supply can only be increased at a rate of 1-2% per year, nearly the same rate as a growing population, but its supply can only be increased by productive individuals who climb into the bowels of the earth to get it out.  When you exchange a good or service for gold, you know that the piece of gold you receive was at some point mined by a hard working individual.  Value is exchanged for value.

It is obvious that governments, central bankers, and bankers get a much easier ride today when they exchange nothing for something, by creating currency at no cost, while the public continues to eagerly lap it up.

Many governments are well aware of how fraudulent and deceptive the ponzi-like monetary regime of today is.  One such government is the state government of Kelantan - a province of Malaysia.  To quote ft.com/beyondbrics: “This government is introducing a new monetary system featuring standardised gold and silver coins based on the traditional dinar and dirham coins once used by the Ottoman Empire.”

Before we leave you with the article, just note that the move to sound money is well underway.  Why not save the hard earned real value that you created over the years or even just last month in the currency of the future?  We can assure you when a couple of billion people wake up to the reality that the only currency that serves its purpose of being a stable monetary unit that preserves purchasing power is gold, the value of which cannot be manipulated by the few at the expense of the very many, infinity is the limit for gold priced in funny money.

From ft.com/beyondbrics:

Malaysia looks to ancient alternative currency – gold

Paper money is so old hat. While De La Rue – which makes banknotes for 150 currencies – struggles with production problems and management turmoil, in one part of Malaysia, they are looking at an ancient alternative – gold.

In a move applauded by some local Muslims, the state government of Kelantan said it was introducing a new monetary system featuring standardised gold and silver coins based on the traditional dinar and dirham coins once used by the Ottoman Empire.

Nik Abdul Aziz, the state’s chief minister, spoke in visionary terms of an economy in which state civil servants would be paid in the new sharia currency, and the poor would be protected against inflation by the intrinsic value of the precious metals used to produce it.

About 1,000 shops and restaurants in the state have said they will accept the new currency, which follows an earlier issue of gold dinars in 2006. The coins comply with traditional Islamic teaching on the use of coins with intrinsic value as a medium of exchange, rather than paper money.

The coins, minted to a specified weight and purity, are available in a range of denominations from half a dinar to eight dinars, and from one dirham to 20. At the current price of gold, one dinar is worth M$581($183) and one dirham is valued at M$13 ($5).

The launch was lauded by the Muamalah Council, a campaigning organisation that seeks the peaceful introduction of an Islamist social and economic system. The council said it was “the main Islamic event of the last 100 years”. [HA comment: this is exactly the way to create a just, free and prosperous society, by getting rid of corrupt money.  Apart from only being a peaceful introduction of an Islamist social and economic system, it will create a peaceful social and economic system]

The details of the scheme suggest, however, that the people of Kelantan are unlikely to abandon the ringgit, the national currency, in a hurry. The state government said the value of the new coins was M$2m at the current price of gold. It is not known how many of each denomination have been minted, but if they were all worth one dinar there would be just under 3,500. That works out at about one coin for each 400 people in the state.

The chief minister also admitted that there were “many technicalities” to be overcome before the scheme could be significantly extended. He did not explain why a switch to gold and silver coins would protect against fluctuations in the value of money, given that the US dollar price of gold has risen more than five fold in a decade. [HA comment: he doesn't need to, if you take debased value of US dollar out of equation, price of gold in terms of goods and services has been very stable.  Value of gold money will still fluctuate, but less so than paper money]

In spite of its small scale, the scheme may pay political dividends for the state government, which is run by PAS, an Islamist party that is in opposition in the national parliament. PAS is locked in a ceaseless struggle for control of Kelantan with the United Malays National Organisation, the main party in the federal government coalition, which also claims to represent Malay Muslims, the largest population group in Malaysia.

Burnishing its Islamic credentials is unlikely to do PAS any harm. The only certain winner, though, is the gold market. Although small, the scheme will help to increase demand, pushing up prices even further. [HA comment: get your ounce today before the run for gold starts in earnest]

The guys at ZeroHedge also ran a story on this recently.  Find it here.  It’s worth a read if you want some idea of how the creators of USD, EUR, GBP and the like – the rulers of the global credit binge paper money ponzi – will take to this scheme…