Gold is up USD$15.90 to USD$1,409.55.
Silver is up USD$0.95 to USD$27.69.
And World Bank president Robert Zoellick wrote in Monday’s Financial Times:
“The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”
Zoellick was floating around a few ideas on how to restructure the global economy.
Our old pal and Daily Reckoning editor Dan Denning is at the Gold Symposium in Sydney yesterday and today. We can’t quite hear what they’re saying, but our guess is there could be a whole lot of hooping and hollering.
Or maybe they’ve seen all this stuff before and, like your editor, are more inclined to take talk of a new gold standard with a grain of salt.
But before we get onto that, let’s kind of tie-up a loose end. You’ll recall that three of the eminent businessmen who make up the Reserve Bank of Australia (RBA) board were absent from the October RBA board meeting.
We thought it strange that these people were happy enough to take your taxpayer dollars, but couldn’t be bothered turning up to a meeting.
After all, it’s not as though these meetings aren’t known about well in advance. Everyone knows that the RBA meetings are held the first Tuesday of each month from February through to December.
But it seems the Three Cobbers – Roger Corbett, Warwick McKibbin and Graham Kraehe were too busy on the first Tuesday of October.
I don’t know about you, but when I’m booking appointments and I’ve double-booked, I tend to honour the engagement that was booked first. To me it seems like common courtesy and good manners.
In this instance the taxpayer has booked the appointment first. The taxpayer expects that if they have to suffer a central bank then the least the board members could do is earn their money by bothering to turn up.
Anyway, as you know, we childlishly fired off an email to the RBA asking what super-important engagements the Three Cobbers had, preventing them from getting to Martin Place in Sydney.
After a couple of weeks of to-ing and fro-ing, we received the following response this morning from Daniel at the RBA:
“Information supplied by the Board secretariat regarding absences from the October meeting of the Board is that Mr Corbett and Professor McKibbin were in the USA, having travelled there for business and academic commitments respectively, and that Mr Kraehe had an important business commitment in Australia that clashed with the RBA Board meeting.
“The Board secretariat has confirmed that absences of more than one member from a particular meeting tend to be rare, and each of the members absent in October had advised the Board in advance of their intended absence. The Reserve Bank Act states that a quorum for a meeting of the RBA Board is five members.
There you go. What more can we say. We won’t bother pursuing this any further, simply because we can’t be bothered wasting any more time on the subject.
Quite frankly, the more time passes, the bigger the case becomes for abolishing central banks. Just remember what role these people serve. It’s perhaps one of the most influential and open-to-abuse position that exists anywhere in either the public or private sector – and that is the ability to arbitrarily determine the price of money.
Think about it, who in their right mind could possibly think that they and their pals know what the price of a dollar should be? Yet the RBA board members and the other RBA officials seem to believe they’ve been blessed with this ability.
You’ve got to remember that the decisions these bozos make impacts everything. You’ve seen the disastrous mistakes made by the US Federal Reserve of keeping interest rates too low, distorting the market.
Make no mistake, the RBA have done the same thing here, hand in hand with the government. While the RBA only reduced the cash rate to 3% in 2008, the government policy of bribes to first home buyers and taxpayer guarantees to the banks had the effect of reducing the rate further.
Simply because it gave money away for free. The first homebuyers grant gave buyers thousands of dollars at zero interest with no requirement to repay the money. It went straight from the taxpayer pockets onto the bottom line of the banks, via bribes to home buyers.
But back to the central bankers. In our opinion it’s immoral that a small group of government appointed insiders should have such a power.
And you know what happens when people have too much power… just search for Lord Acton’s famous quote if you need a reminder.
An example of abusive power and corruption among central bankers can be seen with the funny business at the RBAs 50% owned Securency polymer money-printing company. Executives there have been accused of paying bribes to gain business from overseas central banks – another example in itself of central bank corruption.
Of course, the RBA has representatives on the Securency board so it’s right at the centre of the scandal. A scandal that has even involved current RBA governor Glenn Stevens who has been accused of spruiking for Securency when he was deputy governor.
It would seem that dark and tawdry dealings are an everyday occurrence in the world of central banking. You only have to look back in history to see that.
We were sent a news story yesterday about a claim by a member of the UKs House of Lords. Lord James of Blackheath claims that a secret organisation was attempting to offer billions of pounds to the UK government in an interest free loan.
Whether that’s true or not we don’t know. Maybe it’s just the ramblings of an old man.
But the biggest bombshell – if you’ll excuse the pun – was that his lordship admitted to his past activities of laundering billions of pounds for the Irish Republican Army (IRA) under the direction of… the Bank of England!
Again, whether it’s true or not we don’t know. But why shouldn’t we believe central bankers get involved in such activities.
I know what you may be thinking, “Far out Sayce, you’re one of those conspiracy nuts… where’s the unsubscribe button?”
Last thing’s first, the unsubscribe button is at the bottom of this email.
As for being a conspiracy nut, not at all. We’re sure that even three years ago no-one would have believed that taxpayers would be put on the hook for billions of dollars to bail out banks, builders and car companies.
And that central banks would openly announce their intention to create billions of dollars of new money from thin air.
Or that a firm owned 50% by the RBA would be involved in paying bribes to foreign officials.
Think about it this way, we know that governments have secret security organisations – ASIO, CIA, MI5, MI6… to do dirty work for them. Is it such a stretch to believe that the government body which controls the printing, distribution and price of the national currency could be up to no good?
Of course it isn’t. Just look at the Securency scandal. Our bet is that whatever has been revealed so far is simply the tip of the iceberg to what these guys really get up to behind closed doors.
OK, I’m sure not all of it is as exciting as laundering cash for terrorist/freedom-fighter[delete according to your preference] organisations, but it doesn’t have to be. That’s not where most of the damage is done.
The biggest acts of terrorism carried out by central bankers is the economic terrorism of devaluing your money while at the same time falsely claiming that their aim is to ensure price stability.
Although according to the US Federal Reserve’s James Bullard – president of the St Louis Fed:
“The dollar is the Treasury’s policy and we have to let the Treasury Secretary run that policy… It belongs to the Treasury, it’s the Treasury’s policy and we try not to comment on it or interfere with it.”
Not “interfere with it”!
It’s extraordinary that a central banker would claim that the value of money isn’t their concern. Especially when less than a month later he voted to approve the creation of USD$600 billion of new money that would automatically devalue every other dollar in existence.
But it gives you some inkling about what happens when people are placed in positions of power. They tend to want to increase their power even further, especially if it means decreasing the power of others.
And what better way to do that than destroy the value of money.
So with all that in mind, can we really believe that central bankers and governments want to return to a gold standard? And that if they did so it would be with good intentions?
I mean, isn’t it governments that destroy money and wealth?
Look, the fact is World Bank president Robert Zoellick is playing to the crowd. The real objective is the preservation of the dominant fiat (paper) currencies. Zoellick makes this clear when he wrote:
“[T]he G20 should complement this growth recovery programme with a plan to build a co-operative monetary system that reflects emerging economic conditions. This new system is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account.”
If they were serious about a gold standard or semi-gold standard, the involvement of existing individual national currencies would be irrelevant.
As long as there is a central bank that has the ability to control the printing presses and which mandates a single legal tender within a nation’s borders then there will always be the temptation for governments to issue more paper money than is backed by gold.
In fact, I’d argue that it’s more likely governments will legislate for the confiscation of gold than it is for anything like a gold standard to be created.
What it comes down to is this. A reversion to any form of gold standard would, by its nature deprive politicians and central bankers of supreme power over the supply, distribution and pricing of money.
A gold standard would mean that the banks would need to back their deposits with something real – gold bars and coins. They would be unable to create money from thin air as they currently do with the system of fractional reserve banking.
And if they did try to issue more bank notes than the gold held in the vaults, customers would soon get wind of this and demand their gold… if the bank was unable to meet its obligations to all depositors it would go bust.
But most importantly, a gold standard would limit the ability of governments to do what they do worst… spend money and wage wars. History tells you that fighting wars is difficult when the supply of money is limited.
That’s why European nations – specifically the UK – suspended adherence to the gold standard when it wanted to fight a war. That allowed it to print as much paper money or debased coins as it wished.
So, on the one hand it’s pleasing to see that the idea of a gold backed currency is making it to the mainstream, unfortunately the mainstream will only print one side of the story – and that is from the vested interests in government and central banks who loathe the idea of such a thing happening.
The only reason someone like Zoellick would bring the subject up is to try and give the continued use of devalued paper currencies some legitimacy by advocating the use of gold as a pricing mechanism alongside the paper currencies.
The reality is that gold enforces discipline on those in power and restricts them from abusing their power. It’s sad to say, but that’s the last thing that anyone in power wants.
And it provides another reason – if one was needed – why you should hold gold as an insurance policy against further currency manipulation by governments and bankers.