Prelude
This is a rejoinder to an article of the same title by Steven Saville, posted on June 24, 2005 at the SafeHaven. I am pleased that Mr. Saville replied to my earlier article that discussed his piece "Thoughts on Pegging to Gold and a 100% Gold Standard". It is only by thought and discussion, and difference of opinion that learning can take place.
"If all mankind minus one were of one opinion, and only one person were of the contrary opinion, mankind would be no more justified in silencing that one person, than he, if he had the power, would be justified in silencing mankind." [John Stuart Mill Of the Liberty of Thought and Discussion.]
It is with the above quote in mind that we offer the following, as there are many points that seemed to be misunderstood, which could lead to not only misunderstandings, but to disinformation as well.
Act One
The following is a direct quote from initial comments in my first article:
"This is the critical point that all who speak on monetary matters do not seem to get. They define the dollar as being equivalent to the present dollar bill or Federal Reserve Note. A dollar bill and the dollar of the Constitution are two entirely different entities."
So the first point to be cleared up is what I was stating was the critical point of the article. What the above quote was referring to was what was stated right before it, which was the following:
The definition of a dollar was clearly expressed in the Coinage Act of 1792, it being:
"DOLLARS OR UNITS - each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenth parts of a grain of pure, or four hundred and sixteen grains of standard silver." [coinage act of 1792]
The fact that Mr. Saville does not ever mention the above definition anywhere in his reply, including in his listing of what he considered the main points that I "appeared" to be trying to make, is a perfect example of the exact point I made, namely, that many who speak on monetary matters do not understand what a dollar is or isn't, nor the importance that such has on the overall understanding of monetary policy, or any topic related to money.
The above definition defines what our Constitution and the Original Coinage Act of 1792 set as the standard of our monetary system, yet Mr. Saville never mentions it once. This is why I write what was stated, as the term "dollar" is constantly thrown about in the most casual and flippant manner, as if everyone understands what it is. And for whatever the reason, nothing of substance was added by Mr. Saville regarding the following statement that went along with the above quote as far as "importance" was concerned:
"One is the original hard money silver standard of a specific weight of silver, the other is a piece of paper, a bill of credit, an i.o.u. or promise to pay, an obligation. A silver dollar was not a promise to pay or an obligation, it was the means of making payment, it was payment of the obligation, not a receipt for it."
Perhaps this is why so many accept the unacceptable - paper fiat Federal Reserve Notes of debt obligation as money, as even the so-called experts seem to accept it, or not question it.
Act Two
Mr. Saville equates his statement of:
"Any half-hearted attempt to make gold part of the monetary system would be doomed to fail and would lead to gold unjustly getting unjustly blamed after the inevitable breakdown occurred."
With what he quotes as being said by me:
"The (non-100%) gold standard and the gold exchange standard were doomed/designed to fail, resulting in the reputations of gold and silver becoming unjustly tarnished."
Which statement I can't for the life of me find in my original article. What was said was:
"Learn why both the gold standard system and the gold exchanged system were doomed to fail, on purpose - to tarnish the reputation of gold and silver so that people would come to accept the unacceptable, so that the experts such as yourselves not only accept the unacceptable, you pontificate and push the moneychangers exact ruse upon the people."
Perhaps these statements are all the same. I don't think so. It is left for the reader to decide, as it should be. I would direct attention to "on purpose", and "so that people would come to accept the unacceptable."
Act Three
The second comparison made by Steve was to equate the two following statements, the first I made, the second he made:
"Fractional reserve banking is a bad thing. It has, for instance, led to a 95% loss of purchasing power since 1913." [Gnazzo]
"Sound money and fractional reserve banking are incompatible." [Saville]
Granted, these two statements are close, but I don't see Mr. Saville mentioning the very important point of a 95% loss of purchasing power of the Federal Reserve Note, or dollar bill. I do, however, recall Mr. Saville stating the following about gold's purchasing power:
"For example, gold's purchasing power increased by around 1000% during the 1970s and then fell by more than 80% between 1980 and 2001."
This appears to be true, if one accepts the unacceptable - if one accepts the fact that the powers that be have turned the constitutional definition of a dollar upside down, and are now allowed to price gold in terms of x amount of dollar bills, when it was gold that defined what a dollar was, i.e. a specific weight of silver - the Silver Dollar.
As I stated in the original article, which would seem to be of some importance, although once again, nothing like it is mentioned by Mr. Saville, so perhaps it isn't:
"The moneychangers have done just what there name says - they have changed the definition and meaning of money, without a constitutional amendment, which means that any such changes are unlawful, as they are not in pursuance of the Constitution."
And if I recall correctly, Mr. Saville was given the benefit of the doubt when I stated:
"This whole backing ideology is completely wrong and alien to honest money. Perhaps this is what he was alluding to when he said," [Gnazzo]
"One of the most important things to realize is that any half-baked attempt to have an official link between a national currency and gold will be doomed to fail because sound money and fractional reserve banking are incompatible." [Saville]
Act Four
Next Mr. Saville next equates the following two sentences, the first is mine, the second his:
"The dollar should be defined as a weight of gold or silver." [Gnazzo]
"A gold-based monetary system only works if implemented totally; for example, if there is no fractional reserve banking and the dollar is defined as a weight of gold." [Saville]
Once again, I have gone backed and searched the article, but I cannot find where I supposedly made the statement Mr. Saville claims: that "the dollar should be defined as a weight of gold or silver."
What I did say was:
"The constitutional definition of a dollar is a weight of silver, the Silver Dollar. There has never been a constitutional amendment to change it, thus it still stands, it is the Supreme Law of The Land, regardless if the government and people follow it or not."
Perhaps Mr. Saville equates "should be defined", with "the constitutional definition of a dollar is a weight of silver, the Silver Dollar. There has never been a constitutional amendment to change it, thus it still stands.." - but I don't.
The two statements are completely different. We will leave it for the reader to decide for themselves, based on the evidence presented or not presented, as the case may be.
Also, a dollar defined as a specific weight of silver [Gnazzo], is not the same as a "weight of silver and gold" [Saville], nor with Mr. Saville's position of it being a "weight of gold."
This is why I have stated that many do not understand the difference between the Constitutional standard of SILVER that was accompanied by a monetary exchange system, of gold and silver coins that exchanged at a fixed ratio of 15 to 1; nor the exact difference between such a hard money system, the gold standard, and the gold exchange standard - all of which are different.
Act Five
As a perfect example of accepting the unacceptable, Mr. Saville uses the following as a reason for "noting the major benefits of the current system of free-floating irredeemable currencies", which, unless I'm mistaken, is saying that there are good points to the present system of irredeemable currencies - of accepting "black for white and white for black."
"And there are, in fact, two major benefits that we can think of, the first being that when someone becomes concerned about the on-going inflation they are free to exchange their dollars (or euros or Yen) for gold, secure in the knowledge that the gold price will, within a reasonable amount of time, reflect the effects of the inflation." [Saville]
Once again, perhaps Mr. Saville does not think that "to exchange their dollars (or euros or Yen) for gold, secure in the knowledge that the gold price will, within a reasonable amount of time, reflect the effects of the inflation", is to accept the unacceptable, or pricing of gold in dollar bills, as opposed to the Constitutional Standard that defines a dollar as a weight of silver that is exchangeable for a weight of gold, - but I do.
Silver and gold being priced in dollar bills is not the same as a dollar being a weight of silver and gold. Period. This is why, unfortunately, even many so-called gold-bugs get this whole money thing wrong.
For how is one going to "reflect the effects of inflation" by purchasing gold, and then what, selling it for debased dollars that have lost their purchasing power?
How does this protect one against inflation or the loss of purchasing power if the dollar you sell your gold for looses more of its purchasing power after you sell your gold. Then what?
The elite international banksters have done a very good job of fooling people into accepting the unacceptable. Do not be fooled. Knowledge is power. Empower yourself.
Final Act
Lastly, Mr. Saville states "It seems that hard money advocates can't even agree without getting into an argument."
First, I didn't realize it was an argument as opposed to a discussion of a difference of opinion about some very crucial, and generally misunderstood issues.
Second, I do recall giving the benefit of the doubt to Steve, and two, making the statement that "so I agree with Mr. Saville that pegging the Chinese renminbi to gold might not be the best of ideas, but not for the exact reasons that Mr. Saville states."
And I do agree with Mr. Saville on many things he says, I even pay him money for his newsletter, but I also disagree with some of the things he says, as he does with me.
It is by our mistakes that we learn. Perhaps we can both learn from each other. Perhaps we can all learn from each other. Otherwise:
"If all mankind minus one were of one opinion, and only one person were of the contrary opinion, mankind would be no more justified in silencing that one person, than he, if he had the power, would be justified in silencing mankind." [John Stuart Mill Of the Liberty of Thought and Discussion.]
