Gold and Philosophy

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Courtesy of David van der Linden @ New Austrian.org:

A recent article one came across presented an interesting analogy. It was stated that “unconscious thought is like fluid gold, streaming down the side of a mountain towards a deep chasm”[1]. Placing moulds along the mountain saves the gold from flowing into the chasm, just as increasing one’s vocabulary allows one to capture thought and express ideas. The conclusion of the analogist was that the study of philosophy is of value, since one learns to explicate unconscious thoughts, just as capturing gold on the side of the mountain allows one to capture value.

The analogy as it stands is of limited use. Rather than to view gold merely as an object of value, one might learn more by heeding the unparalleled marketability of coined gold. To state that simply capturing gold is a useful endeavour seems to be an objectification. Gold is not valuable in and of itself, rather it is valued by individuals. Capturing gold in moulds does not directly imply one is capturing value, unless one first assumes gold is a valuable substance in and of itself. The minting of gold into coin on the other hand, is useful since one increases the marketability of the substance. To return to the analogy, one can say that broadening one’s vocabulary -the goal of which is to be able to explicate thought- may increase the marketability (or exchangeability) of one’s ideas. Thoughts and ideas are not valuable of themselves, yet it is useful to increase the exchangeability of the same so as to be able to debate, discuss and develop them. Continue reading

Quantitative Easing – The Final End Game

Courtesy of Sandeep Jaitly @ Fekete Research.com:

What we are currently witnessing with the various ‘quantitative easing’ procedures across the world is the culmination of a process that began many decades ago in the 1920s shortly after the establishment of the Federal Reserve System.

The Federal Reserve System was set up in 1914 to run in a similar fashion to the London gold bill market. The charter informs us that the purpose of the System is to:

“…furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes…”

At its founding, the assets of the system were limited to commercial paper, i.e. self- liquidating gold bills and gold, to the strict exclusion of government securities – i.e. government bonds redeemable in gold (via the fiat ‘dollar’ name intermediary.) This was thrown to the wind during World War I. The ‘Liberty Bond’ series was initiated in April 1917 with a $5bn issue, followed by a $3bn issue in October. In 1918, April and September saw $3bn and $6bn issues respectively. The first four ‘Liberty Bond’ issue amounted to $17bn (approximately 25,000 tonnes gold.) When the repayment of these bonds within the given schedules looked more unlikely, they started appearing on the System’s balance sheet and were thus ‘accommodated.’

Bills being discounted from the Member banks started to dry up in the early 1920s reducing the Reserve banks’ revenue, as the ‘Liberty Bonds’ were rolling off. So in the first half of 1922, they purchased government securities from the open market. This didn’t have the intended effect – as soon as government securities were purchased, any commercial bank paid off their loans to the Reserve banks further – increasing the Reserve banks’ income. But, the commercial banks were in a theoretically more advantageous situation for lending on.

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